Understanding Breach of Contract

Breach of contract refers to a legal problem wherein one party refuses to uphold his side of the agreement. Being in breach does not automatically mean a civil suit since both parties can discuss or renegotiate the terms of the contract or agreement. This, however, implies that the party that isn’t in breach is willing to sit down and compromise on certain contract issues.

Since a contract is legally binding, the aggrieved party can always refuse to renegotiate or amend the contract and pursue protection under the law. Most often, the end result for the aggrieved party is damages in the form of monetary compensation.

A simple example of breach of contract is when a tenant of an apartment is late with rental payments or when a contractor fails to deliver or complete the repair or renovation of your house. With the landlord/tenant case, the landlord will have to hire a lawyer to help with an eviction notice which has to go through a legal process. In the case of the contractor, the homeowner can refuse to pay until the work is completed satisfactorily.

Anticipatory Breach

Anticipatory breach is a situation when one party clearly shows no intention of meeting the terms of an agreement allowing the other party to terminate the contract and not get penalized for doing so. However, it is tricky to handle this without legal advice since the burden of proof lies with the party that terminates the contract.

The main reason anyone would file for anticipatory breach is to save time and money.

Fundamental Breach

A fundamental breach refers to a serious breach that allows one party to immediately terminate the contract. In addition, it opens the door for the same party to hire a lawyer and sue for damages. An example would be a signed contract to buy an item only to find out that the seller sold it to someone else.

Material Breach

A material breach can be further segregated into 3 scenarios:

Partial Material Breach

Material but not Total Breach

Material and Total Breach

The example given earlier about an incomplete job done by a contractor is an example of partial material breach. The situation can be resolved by holding payment until the job is completed.

The Point of No Return: When to File

Any legal expert would advise you to consider and work on settling the dispute without filing a case. It would save both parties from legal expenses aside from preventing the situation from deteriorating into a full-blown war of words, so to speak.

However, if no resolution is possible, the best lawyer to consult with is a contract lawyer. This law specialist will be able to assess objectively the extent of damages and whether it should be in the form of substitutionary or equitable remedy. The first remedy refers to payment in monetary form to compensate for the harm caused by the breach while equitable remedy refers to unique benefits to compensate for the harm done such as the case mentioned earlier of a disrupted sale because the seller sold the agreed item to someone else. With equitable remedy, the court may issue an order that the item be sold to the aggrieved party if the item is unique and one-of-a-kind.

How to Avoid Being in Breach

If you happen to be in a situation where you feel you can no longer honor the terms of a contract, your best option would be to consult a lawyer. The lawyer should open the idea of a renegotiation of contract terms with the other party and advise you that you may have to pay something to the other party to terminate the contract. Another option available is to prove to the other party your inability to honor the terms and humbly request for understanding and leniency.

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