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Understanding breach of contract

On Behalf of | Apr 1, 2024 | Business Law

Contracts are agreements between parties that outline the terms and conditions of their interactions or transactions. When one party fails to fulfill its obligations as stated in the contract, it results in a breach of contract.

A breach can lead to various consequences depending on the severity and circumstances of the violation.

Types of breach

There are three main types of breaches of contract. A minor breach occurs when a party fails to perform a small or inconsequential part of the contract. Despite the breach, the purpose of the contract is still achievable. For example, if a contractor fails to complete a project by the specified date but finishes shortly after, it may be a minor breach.

A material breach is a significant violation that undermines the core purpose of the contract. In this scenario, the injured party may seek damages or terminate the contract. For instance, if a seller fails to deliver goods as agreed upon in a sales contract, it constitutes a material breach. Florida law states that the party that caused the breach may liquidate the damages, but only for an amount that is reasonable for the harm the breach caused.

An anticipatory breach occurs when one party clearly communicates its intention not to fulfill its obligations before the actual performance is due. This allows the other party to pursue legal action immediately, rather than waiting for the breach to occur. For example, if a supplier informs a buyer that they will not be able to deliver goods as agreed upon in the contract, it constitutes an anticipatory breach.

Consequences of Breach

When a breach of contract occurs, the non-breaching party may pursue several remedies to address the situation. The first remedy is damages. The non-breaching party may seek monetary compensation for any losses they incurred because of the breach. In cases where monetary compensation is inadequate to remedy the harm caused by the breach, the court may order specific performance. In this case, the breaching party will need to fulfill its contractual obligations.

If the breach is significant enough, the non-breaching party may have the right to terminate the contract and seek restitution for any losses they suffered.

A breach of contract shows a lack of good faith by one of the involved parties. When it happens, the damaged party may need to take legal action.