If you deal with several contracts, chances are you will run into a breach of contract. Unfilled obligations are a common risk in the contractual world. Sudden financial problems occur, delays happen, and other unexpected events occur. But since a contract is a legally binding agreement, the injured party has the right to pursue a legal remedy.
Join the Mughal Law Firm team in this discussion about a breach of contract. Let’s get started with defining the term “contract breach.”
Breach of Contract Definition
In legal terms, a breach of contract is essentially the violation of a contractual agreement. It occurs when a party to the deal fails to fulfill its obligations stipulated by the contract in question.
Also, a party interfering with another party’s ability to fulfill their duties is considered a violation of the contract. A party can breach the agreement partially or in whole.
Types of Breach of Contract
Material Breach
It occurs when one party gets substantially less or different results than those specified in the contract. If you contract a marketing agency to build a website within a certain period and fail to deliver, that’s a material breach that entitles you to take legal action.
Immaterial Breach
Also known as a partial or minor breach, an immaterial breach happens when a party receives essential aspects of the agreement but misses a few obligations. Whereas the affected party may take legal action, it’s hard to show damages emanating from an immaterial breach. For example, if a company ships your products late, you can pursue legal action only if you can prove how the delay costed you financially.
Anticipatory Breach
An anticipatory breach of contract occurs when a party to a contract admits that they will not fulfill their obligation by the agreed-upon date. So, anticipatory breaching of contract occurs when a party explicitly informs the other party about their inability to perform their side of the agreement.
An example of this type of breach is when a receiver of a monthly service indicates that they will not pay for a month but still expect the provider to deliver the service.
Breach of Contract Defenses
In a lawsuit, the breaching party has a legal right to explain why the alleged breach of contract should be excused. That’s what we call a breach of contract defense. Below are the common breach of contract defenses:
Duress or Undue Influence
Duress occurs when one party coerces another party to sign an agreement via threats or physical force. It simply means one party didn’t sign the contract willingly, which a solid ground for invalidating the agreement.
Undue influence is quite similar to duress, but in this case, one party used their power advantage to force the other party to sign the contract.
Fraud
A contract can be invalidated when the complainant failed to disclose a critical aspect or lied about an important matter. But this requires the breaching party to establish that the fraud was deliberate.
Mistake
If the breaching party can prove that both parties made a mistake about a subject matter of the contract, this might be enough to serve as a defense against the breach.
Statute of Limitations
Typically, there exist deadlines by which a defendant must file a case in court. The law that covers these time frames is known as the statute of limitations.
A court can dismiss a breach of contract case if the defendant can prove the expiry of the statute of limitations. Statute of limitations for written agreement typically ranges between three to six years.
Breach of Contract Remedies
If an individual or a business with which you entered into an agreement fails to fulfill their end of the bargain, you are entitled to relief. In legal terms, the relief is called remedy. The primary remedies for a breach of contract are:
Monetary Damage
Monetary damages refer to the money which the defendant must pay for breaching a contract.
In a case of a total breach, the affected party can recover the sum which they would have received had the defendant wholly performed their obligation. The payment can include the lost profits.
Talking of a partial breach, the plaintiff recovers the sum equating to the amount necessary to hire someone else to complete the breaching party’s part of the contract.
Money damages can be compensatory damage or punitive damage.
Compensatory damage is geared to cover the loss that the breaching party incurs due to the breaching of the contract. Types of compensatory damages include:
- General damage: covers the loss directly associated with the breach,
- Special/ consequential damage: Covers any loss related to exceptional circumstances known to the breaching party during the contract formation.
Punitive damages are the payments meant to punish the breaching party for wrongdoing and prevent others from committing similar acts. They are awarded in addition to the compensatory damages.
Specific Performance
Specific performance comes in when monetary payments are not enough to compensate the non-breaching party. It requires the breaching party to fulfill their obligation as stipulated by the agreement.
Restitution
Under restitution, the breaching party is required to return any money or property from the non-breaching party as outlined in the contract. It doesn’t compensate the injured party for lost profits but only aims to restore them to their position before the agreement.
Rescission and Reformation
Rescission occurs when the court terminates the contractual duties of both parties. It applies to instances where the parties enter into an agreement because of fraud, duress, undue influence, or mistake, and termination makes the most sense.
Sometimes, instead of setting aside the agreement, the court can reform or change a contract to correct unfairness. This is known as reformation.
Should You Contact an Attorney for Help with Breach of Contract Dispute?
If you think an individual or business with which you entered into a contract has breached the agreement in any way, you should see an attorney. The professional can tell if you have a strong case and prevent spending resources on a lawsuit you are likely to lose.
If you are the defendant, list the services of a contract attorney to discuss your case and establish the defense.
Whether you are the plaintiff or defendant of a breach of contract dispute, attorneys at Mughal Law Firm can help you determine where you stand and establish the best course of action. We also help businesses and individuals in Virginia craft and negotiate contracts.
Give us a call at (703) 520-7571 or shoot us a message online for immediate help with your contract issue.