A breach of contract is a big deal in the business world. So whether you’re the accused or accuser, our best advice is to reach out to a California business attorney to give you personalized advice.
But if you’re looking for high-level information on what a breach of contract means, we’ve got you covered.
What is a Breach of Contract?
A breach of contract is when one party breaks the terms of an agreement between two or more parties.
In the business world, there are a bunch of types of contracts flying around.
- Non-compete agreements
- Material agreements between manufacturers and suppliers
- Price agreements
- Service agreements
- Employment contracts
Every contract – and every breach – is a different situation with different terms and parties. But contracts help the marketplace function because it gives organizations a level of trust that each party will do what they committed to in the agreement.
Types of Contract Breaches
There are a few main ways a contract can be breached.
The first is called an actual breach. This is when one party doesn’t hold up their side of the bargain. For example, they may have missed a deadline or provided inferior goods or services that didn’t match what was agreed to in the contract.
The second is called an anticipatory breach. This is where one party tells the other(s) that they won’t be able to hold up their end of the deal.
Note that both actual and anticipatory breaches of contract entitle recompense to the innocent party.
The other way a breach of contract is looked at is minor vs. material.
Let’s say a raw materials supplier has a contract with their client, a manufacturer, to deliver goods on June 1st.
- A minor breach of contract is when there is no significant difference between the agreed-upon terms and what was delivered. So if the goods were delivered on June 2nd, it would probably be a minor breach of contract.
- A material breach of contract is when the difference is significant. If the goods were delivered on October 15th – 3.5 months after the original date – that is likely to be a material breach of contract.
As you would expect, the consequences of a material breach of contract are typically worse than a minor breach.
How a Breach of Contract is Remedied
The most common way for parties to settle this is monetary. The innocent party will be paid somehow to compensate for the losses caused by the breach.
For example, suppose the manufacturer lost sales because the raw materials were delivered late. In that case, they may seek the value of lost sales due to the late shipment.
The actual amount can be tricky to calculate, partially because there are different types of damages, like expectation and consequential damages. The type of damages calculated generally depends on the situation.
A breach of contract should not be taken lightly. We encourage anyone involved in a claim to get a lawyer’s advice to help them get through the situation. Call us at 714.456.9118 or send us an email at firstname.lastname@example.org, and we’ll get through it together.