Breach of Contract

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What is Breach of Contract? 

Breach of contract is a legal term that describes a violation of a contract or agreement in which one party fails to fulfill its promises or by interfering with the ability of another party to fulfill its duties. A contract may be breached in whole or in part.

Most contracts end when both parties have fulfilled their contractual obligations, but it's not uncommon for one party not to completely fulfill his or her part of the contract agreement.

Breach of contract is the most common reason contract disputes are brought to a court for resolution. In order for a breach of contract to be upheld by a court it must meet all of these requirements:

  • The contract must be valid; that is, it must contain all the essential contract elements so that it can be heard by a court. If all essential elements are not present, the contract is not valid and there is no lawsuit.
  • The plaintiff must show that the defendant breached the contract.
  • The plaintiff did everything required in the contract.
  • The plaintiff must have notified the defendant of the breach. If the notification is in writing, this is better than a verbal notification.

Defenses to breach of contract

A defendant may offer a reason (defense) why the alleged breach is not really a breach of contract. Common defenses against a breach of contract are:

  • Fraud, which "knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his or her detriment." The defendant is saying that the contract isn't valid because the plaintiff failed to disclose something important or made a false statement about a material (important) fact. The defendant must show that the fraud is deliberate.
  • Duress, which occurs when one person compels another to sign a contract through physical force or other threats. This too invalidates the contract, since both parties didn't sign of their own free will.
  • Undue influence is similar to duress, in that one party has an power advantage of another and uses that advantage to force the other to sign the contract.
  • Mistake. A mistake by the defendant can't invalidate a contract and take away a breach of contract case. But if the defendant can prove that both parties made a mistake about the subject matter (a car, let's say), it may be enough to serve as a defense.
  • Statute of limitations.Many types of cases have a time limit by which a case must be brought. If the defendant can show that the statute of limitations has expired, the breach of contract case may be thrown out. Statutes of limitations are set by individual states. Here's an example of the state statutes of limitations on debt.

Remedies for breach of contract

If one party is found to be in breach of a contract, the plaintiff has several ways to be made whole; called a remedy. The most common remedy is monetary payment. Some other common remedies for a loss resulting from a breach of contract are:

  • Damages, including compensatory damages (to compensate for the actual loss) and punitive damages.
  • Injunction, to get a court to require the other party to stop an action that is causing damage.
  • Rescission. Sometimes the plaintiff has been so badly damaged by the breach that the injured party is allowed to rescind (terminate) the contract.

Types of breach of contract

  • Material breach is a breach that is significant enough to excuse the aggrieved party from fulfilling its part of the contract.
  • Partial breach is not as significant, and it does not excuse the aggrieved party from its duties.
  • Anticipatory breach. A party may breach a contract by doing, or failing to do, something that shows intention not to complete duties under a contract.

Source: Black's Law Dictionary