A breach of contract is a failure to meet the expectations in the contract. Pretty simple stuff, right? But, of course, contracts are rarely simple – and they’re far from foolproof. Breaches of contracts span from trade secrets being released and financially ruining you to something as insignificant as the size of your logo.
However, for it to be a breach of contract, the failure needs to be without a legal reason.
Typically, the failure to meet contractual obligations needs to be a result of intention, negligence, unwillingness, malice, or complete, total, and utter incompetence.
For example, you and your contractor agreed your store would be built in six months. But you find out after the contract is signed that your land isn’t zoned for commercial. The build isn’t done on time and you think it’s a breach of contract because they promised it would be done. It’s probably not a breach. At least, not on the part of your contractor.
There’s a reasonable legal reason your store wasn’t done on time (IE: the zoning issue.)
However, if they agreed to rezone your land and have it done in six months – which no reasonable contractor would agree to – then, yes, it would be a breach of contract.
Providing no other legal issues popped up between points A and B, that is. Which they probably would. But for sake of simplicity let’s not get into zoning regulations here.
In any case, breaches of contract are typically placed in one of three buckets: material, minor, and anticipatory.
Material Breach Of Contract
Material breaches of contract are also called fundamental breaches. They’re the kind most people think of when they hear the term “breach of contract.”
A material breach is when the failure results in one – or both – parties getting something substantially different than what they were promised. This includes things like deliverables and payment, of course. But it includes promised benefits and implied or express warranties as well.
Violations of non-compete, non-disclosure, and theft of trade secrets usually fall into this category as well because they’re either upheld or they’re breached.
In short: if it was essential to your contract and it wasn’t upheld, it’s a fundamental breach.
Fundamental Breach Examples
Say you bought a house and the seller agreed to give you the deed and the keys on a certain date. But that date comes and goes and now the seller is refusing to give them to you.
This would be a material breach of contract since the keys and the deed are an essential part of your contract and it wasn’t upheld.
Another more mundane example would be if you ordered 100 pairs of tennis shoes for your business. But the vendor sent 100 pairs of soccer cleats and refused to refund you or ship you the right product.
Since tennis shoes and soccer cleats are substantially different, this would be a material breach as well. And would likely result in damages if you were charged more for the cleats you didn’t want.
And our final example. You were promised a refund if you didn’t see a 15% increase in revenue. Your business saw a 12% increase, but not 15%. But now the company is refusing to honor their promise for a refund after they failed to deliver on their promise.
Since promises of benefits and warranties are covered here, this would be a material breach as well.
Resolving A Material Breach Of Contract
Most people want to know… can I sue for a material breach of contract?
Of course, each case is unique. And if you want to pursue yours, you’ll want to consult a lawyer. But here are a few things lawyers will almost always look at in these cases:
- The extent of the breach – how serve or fundamental was it?
- If the breach was caused by an honest mistake, negligence, or an intentional act – negligence and intention are usually more severe.
- The likelihood that the contract can be finished or resolved – the more likely, the less likely your case is to succeed.
- How the non-breaching party was deprived of contract benefits – the more benefits you lost, the better your case.
- If the non-breaching party can be compensated – if you can’t prove damages, no, you usually can’t sue.
If damages can be shown, yes, the non-breaching party can sue and pursue compensation from the party that breached the contract. Or simply to bring the contract to a premature close.
In cases of theft of trade secrets or violations of non-compete or non-disclosure agreements, damages can’t be reasonably calculated.
However, the non-breaching party may file an injunction to stop the other party from continuing the breach.
Depending on the relationship, the non-breaching party can choose to request a court order requiring all parties to complete contractual terms. Or to reform the contract to bring it to a satisfactory completion.
But at this stage in a contract breach, a civil resolution for both parties is usually unlikely.
Minor Breach Of Contract
A minor breach of contract is also called a non-material breach, or a partial breach. It’s when the product was delivered and the contract was completed, but a non-essential portion of the contract wasn’t fulfilled in some way.
In most cases, this type of breach is a time-based issue, but not always.
Examples Of Non-Material Breach
Say you hired a painter to paint your house and you agreed on French white in an eggshell finish. They painted your house the French white you asked for, but they used a satin finish instead of eggshell.
This would likely be a non-material breach because the painting was done and in the correct color – but the finish was off just slightly.
Since it’s just the finish, most judges would likely view this as a non-essential piece of your contract. Unless eggshell cost substantially less than satin, in which case, you may have a case with the cost increase causing damages for the more expensive paint as well as the cost of repainting.
But it’s unlikely.
Similarly, if you ordered $1,000 worth of hardcover books for your store, but you got $1,000 worth of soft covers, it’d likely be viewed as a minor breach. You still got the books, they were all the right books – and you probably got more because hardcovers are expensive – but you got the wrong type of cover.
Again, unless you had special circumstances surrounding the order. Like you had an author signing and they would only sign if you had $1,000 worth of their hardcovers or something else that you could claim damages on.
The same is true for the timeline piece of this type of contract breach. Often, deliverables being a day or two late – or even months late – is considered a minor breach of contract.
Providing the delay can be deemed “reasonable.”
Unless the contract has a clause stating that your deadlines are firm and non-negotiable, or that time is of the essence, this type of breach is usually not enforceable. And even if you did have that in your contract, you’d still need to prove that your deliverables being a day or two late cost you some sort of damage in order for you to sue over it.
Resolving A Of Minor Breach Of Contract
Can you sue for a minor breach of contract?
Again, unless you can prove damages. This is usually not the case in this type of breach. So, how exactly do you go about resolving it?
Unfortunately, the answer is that it doesn’t usually get resolved. Aside from breaking your contract early if it’s ongoing or trying to get the breaching party to fix it by using goodwill. If you were actually damaged – financially, that is – by the breach, you can certainly pursue damages.
But other than that there’s not much that can be done.
Anticipatory Breach Of Contract
As the name suggests, this type of breach of contract happens before the actual breach of contract occurs. It’s also called anticipatory repudiation and it happens when it becomes clear that one party won’t meet their obligations outlined in the contract.
This type of breach allows the non-breaching party to terminate the contract, avoid unnecessary expenses, and pursue damages before the contract inevitably falls through.
In most cases, this type of breach comes down to incompetence – whether they intentionally overpromised and underdelivered or not doesn’t really matter here.
Occasionally though, their unwillingness to deliver by the deadline can also fall into this category.
Examples Of Anticipatory Repudiation
Taking one of the examples from above, you bought a house and the seller agreed to hand over the deed and the keys in the future. But a week before you’re supposed to get the deed or the keys, the seller is telling you they won’t do it. They haven’t done it yet, but it’s clear that they won’t.
At this point, you can act on an anticipatory breach of contract because you anticipate they will breach their contract.
Another example would be the hardcover versus the softcover books you ordered for your store. The vendor takes your money and tells you they’ll ship you the books. But a week before they’re supposed to be there, they tell you they’re shipping you softcover books. And, no, they won’t refund you or credit your account, you just have to accept it.
It’ll likely still be a minor anticipatory breach, but it would still be anticipatory. They haven’t failed to deliver the right product yet, but you anticipate they’re unable – or unwilling – to deliver on their promise.
Resolving An Anticipatory Breach Of Contract
Providing that you can prove damages, you can likely sue for an anticipatory breach of contract.
However, in most cases, the damages have yet to occur because you’re acting preemptively. You can also choose to break the contract due to an anticipatory breach.
But if the party you anticipate breaching fights it, you may find yourself in court trying to prevent the breach from occurring.
If you have a good relationship with the breaching party, it might be wise to reconfigure your contract to prevent the breach from occurring. This way both parties can complete their contractual obligations.
In most cases, this means moving deadlines, reduced costs for the non-breaching party, or any other resolution that seems satisfactory to everyone involved.
Though, usually, when contracts start coming apart, relationships follow. In these cases, it’s best to act quickly and certainly consult a lawyer on what the best course of action is so you can avoid financial damages.