What Is a Breach of Contract?

A breach of contract happens when someone doesn’t do what they agreed to in a contract. Imagine if you promised to pay rent on the first of every month, but you miss a payment—this would be a breach of contract.

Contracts are like promises that can be taken seriously, even in court. If someone breaks a contract, the person who got hurt should be given what they were promised. However, breaching a contract is not a crime, and usually, the punishment is just making things right, not extra penalties.

Key Points to Remember:

1. A breach of contract happens when one side doesn’t do what they promised.

2. Contracts can be written down or even just spoken out loud.

3. Breach of contract issues can be settled by the people involved or in court.

4. There are different types of breaches, like small ones or big ones, and when someone says they won’t follow the contract in the future.

5. Breaching a contract isn’t a crime, and usually, there’s no extra money awarded for breaking one.

 Understanding Breach of Contract

When someone breaks the rules of a contract between two or more people, it’s called a breach of contract. This could mean not paying on time (like missing a rent payment) or not doing something they promised to do (like leaving an apartment without paying all the rent they owe).

Sometimes, the contract says what should happen if someone breaks it. For example, if you pay rent late, the contract might say you owe an extra $25 fee. If the contract doesn’t say what to do, the people involved might decide on a solution together, which could mean making a new agreement or going to court.

Types of Breach of Contract

There are two main types of breaches:

1. Minor Breach: This is when something small goes wrong. For example, if a tailor promises to fix your suit by Friday for an important event, but they deliver it on Saturday, that’s a minor breach.

2.  Material Breach: This is a bigger problem. For example, if you order 200 booklets for a car conference, but they deliver gardening pamphlets instead, that’s a material breach.

Breaches can also be:

• Actual Breach: When someone doesn’t do what they promised.

• Anticipatory Breach: When someone says they won’t follow the contract in the future.

Legal Issues with Breach of Contract

When someone thinks a contract was breached, they can take the other person to court. The person who starts the lawsuit is called the plaintiff. The person they are accusing is called the defendant.

The plaintiff needs to show that there was a contract and that the defendant didn’t do what they promised. They might need to show the contract, especially if it’s written down and signed by both people. Even oral (spoken) contracts can be valid, but some types of agreements, like selling something worth more than $500, usually need to be in writing.

Courts will look at what each person was supposed to do and see if they did it. They will also check if any changes were made to the contract that could explain the breach. Before going to court, the plaintiff usually has to tell the defendant they’re in breach of the contract.

Reasons for Breach

Courts will also check if there was a good reason for the breach. For example:

• The defendant might say the contract was fraudulent because the plaintiff lied or hid important information.

• The defendant might claim they signed the contract under duress, meaning they were forced to sign it through threats or physical pressure.

• Both sides might have made mistakes that caused the breach.

How to Avoid a Breach of Contract

To prevent breaches, here are three things to check before signing a contract:

1.  Clarity: Make sure the contract is clear and easy to understand. If someone doesn’t speak the same language as the contract, consider getting an interpreter.

2.  Expectations: Everyone signing the contract should understand what they need to do and be sure they can do it.

3.  Legality: The contract needs to be legal where it’s signed. If you’re unsure, talk to a lawyer who knows about contracts before signing.

You can also avoid problems by carefully choosing who you work with. Research their history to see if they’ve had contract issues before.

Damages and Legal Remedies

In contract law, the goal is to put the wronged person in the same position they would have been in if the contract hadn’t been broken. If someone breaches a contract, they usually have to pay what they owe according to the contract. For example, if a contract says you should be paid $50,000 but you only get $20,000, you can be awarded $30,000 in damages.

In special cases, you might get extra money if you can prove that relying on the contract caused you to spend more money, like buying equipment for a job that didn’t happen.

Economics of a Breach of Contract

Sometimes, breaking a contract makes more sense financially. For example, if the cost of fulfilling a contract is higher than the cost of breaking it, the person might choose to breach the contract. Sometimes, both sides agree to cancel the contract if the conditions change, making the deal no longer beneficial.

Example: A farmer agrees to sell grapes to a winery, but before the sale, the price of grape jelly goes up, and the price of wine goes down. It might make sense for both the farmer and the winery to cancel the contract. The farmer can sell the grapes at a higher price to a jelly maker, and the winery avoids paying more than it can afford. Even though the contract is breached, it might be better for everyone involved, including consumers who want more jelly and less wine.

Societal Effects of Breach of Contract

Sometimes, breaking a contract is better for society, even if it harms one party. If the total cost of keeping the contract is higher than breaking it, it might be better to breach the contract. This idea is called Kaldor-Hicks Efficiency—if breaking the contract benefits more people than it harms, society is better off.

Common Questions About Breach of Contract

• What is a breach of contract? It happens when one person doesn’t do what they promised in a contract.

• Can I sue for a breach of contract? Yes, if someone breaks a contract with you, you can sue to get what you lost because of it.

• Is breaching a contract a crime? Usually not, unless it involves something like fraud. It’s usually a matter between the people involved.

• What are the consequences? If a breach is proven, the wronged party should get what they were originally promised.

• What’s the most common outcome? Usually, the court will order the person who broke the contract to pay enough money to cover what they failed to do.

The Bottom Line

Contracts are made to be followed, giving everyone involved peace of mind. But if a contract is broken, there are ways to fix the situation, often by making sure the person who was wronged gets what they were promised.

Always check contracts carefully, and remember that while it’s not easy to get out of a contract, sometimes a solution can be found if everyone agrees.