Breach of Contract

What Is A Breach of Contract? 

A breach of contract is when a party fails to do a promised act or breaks the contracts’ rules. It can be a major or minor failure to perform the promise.  To completely fulfill a binding contract, the parties need to perform all parts of the agreement.

What Are The Recognized Contract Breaches? 

  • Minor Breach

A minor breach of contract is also known as a partial breach.  It is a breach of contract that is less severe than a material breach.  The harmed party may sue for “actual damages” but must still perform their obligations under the contract.  The harmed party’s performance is not excused by the breach.

  • Material Breach

When one part of a contract does not happen. One party does not receive the benefit that was specified in the contract. That contract allows the other party to request compensation for the failure. There is also something known as the Restatement of Contracts which determines the elements of a major breach of contract.

    • How severe an injured party will be denied the help that is expected.
    • The range in which the harmed party will receive proper compensation for the denied benefit.
    • The scope in which the failing party will give up his assets to compensate the harmed party.
    • The probability that the failing party will fix his failure. Takes into account everything the failing party agreed to.
    • How the failing party’s attitude relates to standards of good faith and fair dealing.
  • Fundamental Breach

The innocent party affected by breach of contract can sue the failing party for damages. The innocent party can also end the contract if they choose to.

  • Anticipatory Breach

When an innocent party recognizes the other party will soon fail to perform the contract. Or the breaching party notifies the innocent party that they will not be fulfilling their obligations. The innocent party will then terminate the contract and can sue before the breach occurs.

  • Actual Breach

When the breaching party does not perform his end of the contract before the due date. By refusing to fulfill their obligations by the due date or performed their duties incompletely or improperly.

Breach of Contract Claim

If an issue is not resolved a breach of contract letter will inform the breaching party that you will sue them. If a lawsuit is fined, the innocent party will have to show a copy of this letter and other documents that correspond to prove their case. A breach of contract claim can be filed with the small claims court but if the contract includes high-value terms; it is recommended to seek an attorney.

When Can An Entity Claim A Breach Of Contract?

An entity can claim a breach of contract when there is a valid contract in effect.The valid contract could be either oral or written. There are three elements that can help determine if a valid contract is in place.

  1. Offer: There should have been a discussion and agreement of an exchange of goods or services for something of value. There should have been an intention to start an agreement or contract.
  2. Acceptance: Both parties agree on terms. This can easily be proven with a written contract.
  3. Consideration: In order to show that a contract was entered, both parties need to show that they got something of value from the other party.

What Must The Claim Include?

A claim of breach of contract should include, the existence of a contract. The non-breaching party will need to bring evidence that there was an actual contract. It is necessary to include the plaintiff\’s performance or non-performance due to the breach.The claim should also include the defendants breach.If the defendant’s duty to perform under the contract is conditioned on the happening of some event, the plaintiff must prove that the event transpired.

What Remedies Are Available For A Breach of Contract? 

Normally monetary compensation is the damages awarded when a breach of contract happens. If monetary compensation is not good enough a court can demand the breaching party to do a specific performance, or an injunction. Legal remedies for a breach of contract depend on whether or not the breach is material. Available remedies include:

  • Non-breaching party refuses to complete their part of the contract.
  • Non-breaching party can sue to obtain compensation for monetary damages. (Actual Damages)
  • Non-breaching party can sue to make the breaching party perform their contractual obligations. (Specific Performance)
  • Expectation damages: Compensates you for what you agreed to receive from the contract.
  • Consequential damages: Indirect damages.
  • Punitive Damages: Compensation if you are injured and also experience a loss of assets.

What Are Some Exceptions to A Breach of Contract? 

Legal justification for a failure to perform a contract is not considered a breach.

How Can I Reduce the Risk of A Breach Of Contract? 

  • Create the best agreements you can when forming the contract.
  • Analyze the past contracts that can be studied to find the best terms that reduce liability.
  • Ensure both parties in the contract are aware of what they have to do when entering into the contract.
  • Keep track of contract performance and make sure parties are still aware of their obligations.

What To Do When A Breach Of Contract Is Suspected? 

If you suspect that a breach of contract happened, immediately communicate with the suspected breaching party. Try to reach a solution with the other party, before burning any bridges. Since, the breaching party may not have realized that it is breaching the contract. Trying to reach a solution between the two parties is recommended, in order to not go to court. If the non-breaching party decides to go to work it is important to understand the time limit constraints when  filing a breach of contract claim. It is important for the non-breaching party to calculate their losses in order to decide on the best legal route. In order to avoid the cost and time that comes with litigation, the party could choose to try mediation.  Another benefit for using mediation, is that it can also help preserve the business relationship, as it is a far less adversarial process.

What Happens If A Party Believes That The Other Party Is Acting In Bad Faith? 

In California, there is a concept of “covenant of good faith and fair dealing.”  Every contract in California contains an implied covenant which imposes on the parties to the contract a duty of good faith and fair dealing, and that the parties will not seek in bad faith to injure or unfairly frustrate the rights of the other party to receive the benefits of said agreement.  It is important to note  however, that a claim for breach of the implied covenant that is based on all of the same acts as a breach of contract claim is repetitive and  should be disregarded, since it does not actually state an additional, separate claim.

A breach of “covenant of good faith and fair dealing,” can also be employed separately from breach of contract.For example, where one party, although technically  within the letter of the contract, has taken actions that are not within the spirit of the document, for example, where the party is seeking to frustrate the purpose of the contract or make it impossible for the contract’s aims to be fulfilled.  This is sometimes alleged in conjunction with a claim for fraud or promissory fraud.

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Justin Sterling, Esq. is a leading civil litigator and business lawyer.  Mr. Sterling is the founder of The Sterling Firm, a top-rated law firm with its original headquarters in Los Angeles, California. The Sterling Firm has a client base that stretches not only across the nation but also around the globe. We offer experienced and driven legal counsel for your matter.  The Sterling Firm handles business law, both transactional and litigation

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