A breach of contract is a material non-compliance with the terms of a legally binding contract.
Enforcement of contracts is a necessary part of any legally binding contract: each party expects to obtain the benefit of the deal agreed by the contract.
If a party doesn’t receive the benefit of the contract by reason of the other party’s breach, the innocent party has a legal right to recover compensation for their loss in damages.
Business agreements are the centrepiece of commerce. Without contracts, there is no business.
It pays to know how they work, and when they’re breached.
What is a Breach of Contract?
Each party to a contract is entitled to perfect performance of the terms of the contract by the other party.
A party will be in breach of the contract – or break the contract – when they fail to perfectly perform one of the warranties, conditions or innominate terms (ie the terms of the contract) they have promised to perform.
The most common forms of breaches of contract are:
- defective performance: where the contract is partly performed but not to the standard required by the contract
- delayed performance: where a party does not perform on time, in accordance with the time frames required by the contract
- complete non-performance: a party does not do anything to perform the contract.
The consequences of a breach of contract depends upon the type of term which has been broken.
Breach of Contract Claims
There are a whole lot of moving parts when it comes to suing for breach of contract claims.
You have to set out the claim out in the particulars of claim, and prove the facts giving rise to the breach on the balance of probabilities to obtain a remedy.
When suing for breach of contract, there are several steps to go through to prepare the particulars of claim to include the essential ingredients and make out a cause of action for breach.
When you’re on the other side – in breach of contract and receiving threats of litigation – taking advantage of mistakes by your counterpart can be fatal to their claim. The windows of opportunity usually don’t last long.
It’s actually quite easy to mess up a perfectly good legal claim for damages for breach of contract. Some businesses breaching contracts and leaving the innocent party in the lurch count on it.
In a clear-cut, indefensible case, a summary judgment application might be warranted. If a claim is not defended, default judgment is available to get judgment quickly. In either case, the claimant can move onto enforcement quickly.
Remedies for Breach of Contract
In contract law, a breach of contract gives rise to a cause of action where the innocent party has:
- a right to monetary compensation, that is, damages for failures to perform the contract
- if it’s serious enough, the right to terminate the contract
- in some cases, may obtain specific performance of the contract, or an injunction to restrain further breaches of contract.
Even then though, the terms of a contract can seriously limit or expand the rights of an innocent party to damages and the other remedies which might be available.
When that happens, remedies that:
- would have been available are excluded, and
- might not have been available are accessible to the innocent party.
The consequences of a breach and the consequences of termination are quite different things. The consequences of a breach depends on the terms of contract itself and what the innocent party does when there is a breach of contract.
What are the Elements of a Breach of Contract?
To make out a claim for breach of contract, you need:
- a legally binding contract, whether it’s an:
- express contract, or
- implied contract.
- non-compliance with one of the legally binding terms of that contract.
There are two possibilities for the term which is breached. It could be an:
- express term, or
- implied term of the contract.
- The express term or implied term will be one of:
- a condition
- a warranty, or
- innominate term (also known as an “intermediate” term).
So, an express or implied term of a contract must be breached by a party to the contract (which may be express or an implied contract).
Then you have a cause of action for breach of contract, and can sue.
The breach of contract doesn’t necessarily need to cause damage (the money remedy which awards compensation) to obtain a remedy for the breach.
Compensation in damages might not be the appropriate or even best remedy for the innocent party.
The remedy with most value might be an injunction to restrain further breaches of contract by the offending party, or force performance with an order for specific performance.
The Irish Claims Authority have a specialist panel of experts who deal with Breach of Contract cases. They can advise SMEs on breach of contract, business law, legal remedies and defences available to legal claims.
As breach of contract professionals, our experts advise on all types of problems and issues that arise with company breach of contracts.
Need legal advice on business law, on a company contract and whether it’s been breached? Contact us today!