The Different Types of Contract Breaches
There are many reasons why two or more parties will enter into a contract. A contract will usually hold both parties legally liable for taking responsibility of what is described in the contract. When a contract is not fulfilled by the terms described therein, this is known as a breach of contract. A breach of contract is when one, sometimes more, of the parties involved does not honor the agreement.
If you or someone you know has a current contract, it is important to know the different types of contracts in order to understand when a breach can potentially occur. This article will cover the four basic types of contract breaches. For more information, it is always essential to seek the advice and representation of a qualified business attorney who can help you understand your specific business needs. An experienced business attorney will help you understand when and if it is possible to get out of a contract, your state-specific business laws regarding the contract in question, as well as how to enter into a contract that will be the most beneficial for you.
The Four Basic Types of Contract Breaches
As previously mentioned, a breach of contract can transpire when one or more of the parties involved does not uphold the binding agreement. If there is a potential breach, it will usually transpire through one of the following four types:
- The breach has been minor
- There has been a material breach
- There has been a fundamental breach
- There has been an anticipatory breach
Breach of Contract: Minor Breach
A minor breach is also commonly referred to as a partial breach. A minor breach happens when the party who did not commit the breach, also known as a non-breaching party, is entitled to collect any damages the party may be owed due to the breach. In a minor breach of contract, the parties can still continue to work together.
While this is often not considered a serious form of breach of contract, it is still nonetheless important to discuss your options with a qualified business attorney. Minor breaches will often not have extensive amounts of damages that a party may collect. However, there are still damages that may be recovered.
Breach of Contract: Material Breach
A material breach of contract ensues when a party has failed to perform an essential part of the contract. Here, the breach is considered substantial since the breach in the contract prevents the project to be completed. In other cases, it can also be considered substantial when the breach has defeated the main purpose of the party’s contract. In a material breach, the non-breaching party is not obligated to continue with their part of the contract. The following is a very common example in which a material breach could ensue:
- Electrical contracts:
- A business owner has contracted an alarm technician to install a top of the line alarm system for the business safety and security. Instead, the alarm technician has opted to use a low-grade alarm system. This is typically considered to be a material breach of contract since the main intent of the contract, which was safety and security, has been ignored or completely overlooked.
Breach of Contract: Fundamental Breach
A fundamental breach of contract is often known as a repudiatory breach. Generally, a fundamental breach is when a party has failed to complete the contract’s term(s), which was fundamental to the agreement. This breach can often interfere with the other party’s responsibilities.
In a fundamental breach, the non-breaching party usually has grounds to file a lawsuit against the breaching party for damages accrued. Further, the non-breaching party will also often have the grounds to terminate the contract in question if they choose to do so.
Breach of Contract: Anticipatory Breach
An anticipatory breach of contract can happen when the non-breaching party comes to the realization that the breaching party will not be able to perform up to the contract’s standards. The non-breaching party then has the right to terminate the binding agreement and proceed to file a lawsuit against the breaching party for damages before the breach even transpires.
After a Lawsuit Has Been Filed
When a breach of contract has ensued and the non-breaching party has decided to file a lawsuit, the court will often award monetary damages. In other cases, a judge may be able to award the breaching party to perform a specific task for the non-breaching party.
It is important to understand that in the United States, punitive damages cannot be awarded to the non-breaching party. For instance, the non-breaching party cannot sue for emotional distress or the loss of time. That being said, a non-breaching party can file a lawsuit for punitive damages if they choose to file a lawsuit for other causes of action.
Seek Legal Assistance for Breach of Contract Issues
It is important to understand that every state will have different laws concerning a breach of contract. If you or someone you know has entered into a contract or is otherwise looking to enter into one, it is important to consult the support of a qualified attorney. If you are looking into entering into a contract, a business attorney with the right experience can help you construct the right contract for your best interests. Already bound by a contract, consulting a qualified attorney can help you understand how to manage the contract legally.