Keith Mack
Breach of contract occurs when one party fails to fulfill the obligations of a contract they freely entered into. This can be due to a failure to perform promised obligations or a violation of any agreed-upon terms and conditions. When this happens, the non-breaching party may sue for relief or a remedy, such as monetary damages, under the law. The type of litigation that follows depends on the type of contract and the promises that were broken. Before filing a lawsuit, it is important to consult a lawyer to ensure your case has a chance of success and to understand the specific laws and requirements in your jurisdiction.
| Characteristics | Values |
|---|---|
| Type of contract | Written or verbal |
| Type of breach | Anticipatory, minor, serious, or material |
| Litigation | Monetary damages, specific performance, or rescission |
| Defences | Duress, mutual assent, statute of frauds, or waiver |
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What You'll Learn
Proving a breach of contract
A breach of contract occurs when one party breaks the terms of a valid contract between two or more parties. This can include failing to fulfil an obligation stated in the contract, or not fulfilling it on time.
Breaching a contract is generally not a criminal offence, but a civil matter between private parties. However, it can be a criminal offence if it involves fraud.
To prove a breach of contract, the plaintiff must first establish that a contract existed between the parties. This is usually done by providing a written document signed by both parties, although oral contracts can also be enforced, depending on the type of agreement. If the defendant denies the existence of a contract, the plaintiff must collect sufficient evidence to prove each element of contract formation, such as relevant drafts, communications, emails, text messages, and other electronic data.
The plaintiff must then demonstrate how the defendant failed to meet the requirements of the contract. This includes proving that the plaintiff performed their contractual obligations, or had a legitimate excuse for non-performance, such as the defendant's prevention of performance or anticipatory breach.
Both sides need to get evidence to prove their side, which could include the contract itself, proof of a verbal agreement, receipts, bills, letters, emails, pictures, and witness statements.
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Types of damages
Breach of contract occurs when there is a violation of any of the agreed-upon terms and conditions of a binding contract. It is considered a matter between private parties, and is generally not a criminal offence unless it involves fraud. When a contract is breached, the injured party can request damages to compensate for their losses. There are several types of damages that can be claimed in a breach of contract case, including:
Compensatory Damages
Compensatory damages aim to put the non-breaching party in the same position they would have been in if the contract had been fulfilled. They compensate the non-breaching party for the actual financial losses suffered as a direct result of the breach. This includes incidental expenses incurred due to the breach, such as transportation or inspection costs for defective goods.
Liquidated Damages
Liquidated damages are those that the parties may have considered in the contract itself. They are typically damages that are difficult to determine in advance but will cost the performing party. For example, a construction contract may include a liquidated damages clause that fines the contractor for each day the project exceeds the deadline.
Consequential Damages
Consequential damages refer to indirect, situation-specific losses resulting from special circumstances caused by a party's actions on a project. This includes lost profits or damaged reputation, and can only be claimed if the breaching party was aware of the potential for such losses when the contract was formed.
Punitive Damages
Punitive damages, also known as exemplary damages, are intended to punish the wrongdoer rather than compensate the injured party. However, punitive damages are generally not awarded in breach of contract cases, as the law recognises that parties should be allowed to breach a contract if it is more economically efficient to do so.
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Litigation and lawsuits
Before filing a lawsuit, it is advisable to consult a lawyer specialising in contracts to assess the prospects of success. A plaintiff must establish that a contract existed between the parties, which can be done through a written document signed by both parties or, in some cases, an oral contract. The plaintiff must then demonstrate how the defendant failed to meet the requirements of the contract.
The defendant may have several defences available, including arguing that the contract was signed under duress, that there was a mutual mistake or misunderstanding, or that the contract is too indefinite or unclear to be enforceable. In some cases, the defendant may argue that the other party waived their right to sue by knowingly giving up that right.
The remedies for a breach of contract typically involve compensatory damages, which aim to place the non-breaching party in the same economic position they would have been in had the breach not occurred. These damages are usually limited to what is specified in the contract. In some cases, specific performance may be awarded, where the breaching party must attempt to fulfil the terms of the contract, but this is generally limited to unique assets like real estate.
It is important to note that the litigation process and available remedies may vary depending on the type of contract and the specific jurisdiction's laws.
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Defenses to a breach of contract
A breach of contract occurs when one party fails to fulfil its promises under an agreement without a legal excuse. It is not usually considered a criminal offence, but a matter between private parties. However, it can give rise to various remedies, including damages, specific performance, or cancellation of the contract.
Defences to a breach of contract
There are several defences to a breach of contract that can be used to argue that one party is not liable for damages. These include:
- Impossibility or Impracticability: Impossibility refers to situations where performance is objectively impossible due to events such as legal changes, natural disasters, or death. Impracticability implies that performance is still possible, but excessively burdensome and unreasonable.
- Duress: Duress is the use of an improper threat to make a party enter into a contract. It can be used as a defence if the defendant entered into the contract under duress.
- Undue Influence: This is the use of unfair persuasion to overcome another party’s free will. A breach of contract claim cannot be maintained if the defendant entered into the contract due to undue influence.
- Unconscionability: An unconscionable contract is marked by a gross disparity in value and oppressive influences in the exchange. A plaintiff cannot maintain a breach of contract claim if the contract is unconscionable.
- Mutual Mistake: A mutual mistake of material fact may excuse defendants from their contract obligations.
- Misrepresentation: A plaintiff’s misrepresentation may excuse a defendant from their contractual obligations.
- Lack of Capacity: A plaintiff cannot maintain a contract claim when the defendant lacked the capacity to enter the contract, for example, if they are a minor or mentally ill.
- Statute of Limitations: There are time limits for filing a breach of contract lawsuit, which vary depending on the jurisdiction and whether the contract is written or verbal. If the lawsuit was not filed within the deadline, the defendant can ask the judge to dismiss the case.
- Arbitration or Mediation: The contract may specify that the parties must go to arbitration or mediation before filing a lawsuit.
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Contract cancellation
A breach of contract occurs when one party fails to fulfil its obligations as specified in the contract without a lawful excuse. This can include failing to perform according to the terms of the agreement, or anticipatory breach, where a party states in advance that they will not deliver on the terms of the contract. A breach must be a material breach for the injured party to have grounds for legal action. This means that there is a significant departure from the contract terms.
If a breach of contract is proven, the court will ensure the wronged party is compensated. This compensation usually comes in the form of monetary damages, which aim to place the harmed party in the same economic position they would have been in had the breach not occurred. In some cases, a court may award specific performance, where the breaching party must attempt to fulfil the terms of the contract as best as possible. This is usually only awarded when dealing with unique assets, such as real estate.
Contract law allows either party to cancel a contract based on a material breach and ask the court to rescind the contract, discharging all remaining obligations between the parties. If the non-breaching party benefited the breaching party, they may request restitution and cancellation to restore themselves to their position before the breach.
Before filing a lawsuit for breach of contract, it is important to consult a lawyer to ensure your case has a possibility of success. It is also important to note that there are time limits on filing a lawsuit for breach of contract. For a written contract, the lawsuit must be filed within four years of the agreement being broken, and for a verbal contract, the time limit is two years.
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Frequently asked questions
A breach of contract occurs when a party fails to fulfill the terms of a legally binding contract without a lawful excuse.
A defendant could argue that the contract was signed under duress, or that unforeseen events like natural disasters, wars, or pandemics prevented them from fulfilling their contractual obligations.
The non-breaching party may cancel the contract and sue for damages. The overarching goal of contract law is to place the harmed party in the same economic position they would have been in had the breach not occurred.
Compensatory damages, liquidated damages, and reliance damages are some of the types of damages that can be awarded.
Breaching a contract is generally not considered a criminal offense. Contract law allows for the cancellation of a contract and compensation for the non-breaching party.
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