Contracts form the backbone of countless transactions, whether in business or personal dealings. But when one party fails to uphold their end of the agreement, it can lead to significant disruptions, financial losses, and stress.
Moreover, understanding the legal ins and outs of contract law, and identifying the appropriate remedies following a breach of contract, can be overwhelming without professional guidance.
Can a breach of contract be resolved without going to court?
What is the difference between a material breach and a minor breach of contract?
Can I claim damages for non-financial losses in a breach of contract?
At Lawhive, our experienced network of litigation lawyers are experts in contract law. They can provide clear, practical advice tailored to your situation through our user-friendly online platfrom for affordable fixed fees.
From initial consultation and assessment of your claim to negotiation, mediation, or litigation, we offer a full range of legal services to resolve your breach of contract dispute.
Contact us today to speak with our experienced Legal Assessment Team and get a free, no-obligation quote for the services of a specialist breach of contract lawyer.
What is a breach of contract?
A breach of contract happens when one party fails to fulfill their obligation under a legally binding agreement without a legitimate legal excuse.
This can apply to both written and verbal contracts, providing they include the elements that make up a valid contract. That is:
One party makes a clear and definite offer to do something or refrain from doing something.
The other party accepts the offer in its entirety.
There is an exchange of value, such as money, services, or goods.
Both parties intend to enter into a legally binding agreement.
Both parties have the legal capacity to enter into the contract.
The contract’s purpose and terms must be legal.
4 types of breach of contract
There are 4 types of breach of contract. These are:
Minor (Partial) Breach
A minor breach, also known as a partial breach, happens when one party fails to perform a small part of their contractual obligations.
This type of breach doesn't usually entitle the non-breaching party to terminate the contract, but they can still seek damages for any losses incurred.
Example:
A small business that manufactures bespoke furniture enters into a contract with a local supplier to deliver a specific type of high-quality wood. The contract says that the supplier will deliver 100 planks of oak wood by the first of every month, and each delivery must include a certificate of authenticity to verify the quality of the wood.
In one month, the supplier delivers the full 100 planks of wood on time but fails to include the certificate of authenticity.
This would be considered a minor, or partial, breach of contract because the main purpose of the contract (the delivery of the oak wood) has been fulfilled. The missing certificate, while important, does not fundamentally undermine the contract's primary objective.
Material Breach
A material breach of contract is more severe and happens when one party fails to perform a significant part of the contract, rendering the agreement's core purpose unmet.
The non-breaching party may seek damages and be relieved of their contractual obligations.
Example:
John enters into a contract with ABC Builders Ltd. to renovate his kitchen. The contract specifies the completion date as 31st March and the scope of work includes new flooring, cabinets, countertops, and appliances.
However, by 1st June, the kitchen is still incomplete, with significant work remaining on the flooring and cabinets. Further, on inspection John discovers that the countertops are chipped.
In this example, ABC Builders Ltd's failure to complete the work on time, and the poor quality of the completed work constitutes a material breach of contract.
This breach deprives John of the primary benefits he expected from the contract—a fully renovated, functional, and high-quality kitchen within the agreed timeframe.
Fundamental (Repudiatory) Breach
A fundamental breach, or repudiatory breach of contract, happens when one party's actions (or lack thereof) are so severe that they undermine the entire contract.
Fundamental breaches entitle the non-breaching party to terminate the contract and claim damages because the breach undermines the entire contract's purpose.
Example:
XYZ Ltd enters into a commercial lease agreement with ABC Properties Ltd for office space. The key terms of the lease are:
Lease Term: 5 years
Rent: £50,000 per year, payable quarterly
Permitted Use: Office space for professional serveice
Maintenance Responsibilities: XYZ Ltd is responsible for routine maintenance, while ABC Properties Ltd is responsible for structural repairs and maintaining the building's exterior.
Six months into the lease, the roof begins to leak significantly. XYZ Ltd notifies ABC Properties Ltd of the issue, as per the contract. However, despite repeated notifications and requests, ABC Properties Ltd fails to repair the roof for several months. The leak causes substantial damage to XYZ Ltd equipment and disrupts their business operations, making the space virtually unusable.
Separately, ABC Properties Ltd allows another tenant to conduct noisy and disruptive activities in the adjacent office space, despite the lease specifying that the premises are for professional services only. This activity further disrupts XYZ Ltd's business and violates the terms of the lease regarding permitted use.
In this scenario, ABC Properties Ltd’s failure to perform essential structural repairs and permitting unauthorised use of the adjacent property constitutes a repudiatory breach of the lease agreement. This breach fundamentally undermines the purpose of the lease and XYZ Ltd's ability to use the office space as intended.
Anticipatory Breach
An anticipatory breach happens when one party says in advance that they will not be fulfilling their contractual obligations. This can be through explicit communication or actions that clearly show they will not perform as agreed.
The non-breaching party can treat the contract as breached, rather than waiting for the breach to happen, and seek remedies immediately.
Example:
ABC Manufacturing Ltd enters into a contract with XYZ Retail Ltd to supply 1,000 units of a specific product by 30th September.
On 15th August, ABC Manufacturing Ltd tells XYZ Retail Ltd that they won't be able to deliver the 1,000 units by the September 30th deadline due to unforeseen production issues. They explicitly state that they will not be able to meet the contract’s requirements and suggest renegotiating the terms or extending the deadline.
However, XYZ Retail Ltd has already planned a major marketing campaign and has committed to customers based on the expected delivery of these products.
The inability of ABC Manufacturing Ltd to deliver on time will cause significant financial and reputational damage to XYZ Retail Ltd.
In this scenario, ABC Manufacturing Ltd’s notification that they will not fulfill the contract by the agreed-upon delivery date constitutes an anticipatory breach of contract.
XYZ Retail Ltd. can act immediately rather than wait until the delivery date has passed.
What is the most common breach of contract?
The most common breach of contract is failure to pay. That is when one party does not make the agreed payments as stipulated in the contracts. This can happen in various contexts, including commercial transactions, service agreements, employment contracts, and loan agreements.
Other common breaches of a contract include:
Failure to deliver goods or services.
Goods or services don't meet the quality standards or specifications outlined in the contract.
A party fails to perform its contractual obligations entirely.
A party performs their contractual obligations, but not within the agreed timeframe.
Failure to maintain confidentiality.
Violation of non-compete clauses.
Goods or services provided do not conform to the terms of the warranty.
Misrepresentation or fraud.
Breach of implied terms.
What remedies are available for a breach of contract?
When a breach of contract happens, the appropriate remedy depends on the nature and severity of the breach and the specific circumstances of the case.
Primary remedies available for a breach of contract include:
Damages
Damages are the most common remedy for a breach of contract. They are financial compensation awarded to the non-breaching party to cover the losses incurred.
Types of damages
Compensatory damages: These aim to put the non-breaching party in the position they would have been in if the contract had been performed as agreed. They cover direct losses and costs resulting from the breach.
Consequential damages: Also known as special damages, these cover indirect and foreseeable losses caused by the breach. For example, if the breach results in lost business opportunities or additional expenses.
Liquidated damages: These are pre-determined damages specified in the contract itself. They are enforceable if they are a genuine pre-estimate of the loss likely to be suffered and not a penalty.
Nominal damages: These are awarded when a breach has occurred, but the non-breaching party has not suffered any significant financial loss. They recognise a breach occurred but do not provide substantial compensation.
Punitive damages: These are rare in contract law and are intended to punish the breaching party for particularly egregious behavior. They are more common in tort cases.
Specific performance
Specific performance is an equitable remedy where the court orders the breaching party to perform their contractual obligations. This remedy is typically used when damages are insufficient to remedy the breach, such as in contracts involving unique items or property.
Injunction
An injunction is a court order that either compels a party to do something or stops them from doing something. There are two main types of injunctions:
Prohibitory injunctions: Prevents the breaching party from continuing an action that breaches the contract.
Mandatory injunctions: Requires the breaching party to take a specific action to comply with the contract.
Rescission
Rescission is an equitable remedy that cancels the contract and restores both parties to their positions before the contract was made.
It is typically used when there has been a fundamental breach, misrepresentation, or duress.
Restitution
Restitution aims to return the non-breaching party to the position they were in before the contract was made. This often involves returning any benefits or payments received under the contract.
It is based on the principle of preventing unjust enrichment.
Reformation
Reformation is an equitable remedy that allows the court to rewrite the contract to reflect the true intentions of the parties.
This remedy is used when the contract, as written, does not accurately reflect what the parties agreed on due to a mistake or misrepresentation.
Declaratory relief
A declaratory judgement is a court order that determines the rights and obligations of the parties under the contract without awarding damages or ordering specific performance. It clarifies the legal position of the parties.
If you are looking to seek remedies for breach of contract, a litigation solicitor can help you understand your options and pursue the most suitable action to address the breach.
At Lawhive, our experienced network of solicitors is here to provide expert guidance and support online for affordable fixed fees.
Contact us today for a free case evaluation and fixed fee quote for the services of a specialist lawyer.
What should I do if I suspect a breach of contract?
If you suspect that a breach of contract has occurred, here are the steps you should follow:
Review the contract and identify which obligations or terms you believe have been breached.
Gather and document all relevant evidence that supports your suspicion of a breach.
Assess the impact of the breach on your business or personal interests.
Take reasonable steps to mitigate any further losses.
Contact the other party to discuss the suspected breach. If direct communication does not resolve the issue, send a written. notice to the other party outlining the breach and requesting a resolution.
Seek advice from a solicitor who specialises in contract law.
Send a letter before action.
File a claim in court.
A solicitor can help you review the contract, prepare the necessary documentation, and guide you through the legal process.
Before filing a claim in court, you might consider alternative dispute resolution like mediation or arbitration. Often, these approaches can be more cost-effective and quicker than litigation.