One of the common lawsuits a business will encounter is the breach of contract. It can be against your business or your business filing it against someone else. As per the law, a breach of contract takes place when one of the parties within a contract fails to fulfill his part of the agreement.
How severe the case can be will vary in different situations. If you are going through a breach of contract case you should know everything about it to understand the situation you are currently in.
Types of Breach of Contract
The first thing that you must know is that breach of contract has four types. Read each of them and identify where your case falls under.
Material Breach of Contract
If one party receives a different outcome than what was stated in the contract, he can file a material breach of contract against the other party. For example, if the other party fails to provide or perform on time as specified in the signed contract, he already committed a material breach of contract.
If this happens, the affected party will have the right to pursue damages that are related to the breach. The most common material breach of contract case in businesses is when one party fails to pay for the services or goods the other party provided.
Minor Breach of Contract
The next type of breach of contract is the minor breach of contract which is sometimes referred to as partial or immaterial breach. A minor breach of contract can be pursued if the other party has only fulfilled his part of the bargain.
A good example of a minor breach is when a supplier delivers your goods late which results in your business to suffer from income loss. Although the supplier has successfully delivered the goods you ordered, the fact that it was delivered late is a ground for minor breach. However, you will have to prove to the court that the breach has caused financial consequences to your business.
Actual Breach of Contract
The actual breach of contract is the breach that has already occurred. This means that one party has already failed to fulfill his obligations as stated in the contract in any circumstances. Whether the other party has failed to deliver his obligations on time or they have incompletely or improperly carried out their obligations.
During an actual breach of contract, the breaching party can do some remedies to avoid it from reaching the court like compensatory damages. This is to address both direct and indirect financial losses caused by the breach.
Anticipatory Breach of Contract
In contrast to the actual breach of contract is the anticipatory breach. This type of breach of contract is a result of the unwillingness of the other party to fulfill what was agreed upon whether it is through written, verbal, and/or conduct.
It is a breach of contract that is about to happen but the other party has already shown a hint of unwillingness to perform his part of the bargain. An example of this type of breach of contract is when party A gets into a contract with party B on July 1, 2021, where party A agrees to sell his car to party B on July 25, 2021, for an amount of $10,000 that party B needs to pay on or before July 20, 2021.
However, party B notified party A that he can not pay the said amount on the agreed date giving a hint of rejection of the contract. In this case, party A can treat the contract as canceled and file a case for the damages caused by the breach. Or party A opts not to cancel the contract and treat it as an active contract and wait for the agreed date to come and see whether the other party will pay or not.
How Judge Will Handle the Case
Aside from knowing the different types of breach of contract, it is important that you also know how the judge will handle your breach of contract case. The judge will have to answer the following questions:
- Does the contract in question exist?
- If it is proven to exist, what does the contract require from both parties?
- Did the contract go through any modifications at some point?
- Did the breach of contract occur?
- If yes, what type of breach had occurred?
- What are the damages the breach of contract caused?
- Does the violating party have a valid reason for breaching the contract?
Before the case will move forward, the judge will have to get all the answers to the questions to be able for the judge to handle the case properly and provide a fair decision.
There are so many things that you need to understand when it comes to breach of contract cases. Now that you already have an idea of what is a breach of contract, when it occurs, and how the judge will handle your case, you will have a better plan in defending yourself for any breach of contract cases you will encounter.