Breach of Contract: How to Identify and Fix

Minor Breach

A minor breach occurs when one party fails to deliver small portions of a contract, but fulfills most of their obligations. This could be as simple as a renter missing a payment by a few days or an Etsy retailer delivering a commission later than the original deadline.

Legal action is typically unnecessary when minor breaches occur. Some contracts, like lease agreements, will include a provision about what to do if rent is paid late. For example, the tenant may be required to pay an additional fee. In other cases, parties may agree on a solution together. For example, the Etsy seller may give their customer a partial refund along with the finished product.

Actual Breach

If a party fails to perform per the contract’s requirements, or performs them poorly, it may be considered an actual breach. In cases of an actual breach, the harmed party can demand that the service be performed correctly, request financial compensation, or take legal action.

Anticipatory Breach

In an anticipatory breach, one party may indicate to the other, either through statements or actions, that they will not fulfill their contractual obligation before the deadline. This gives the harmed party time to consider their options and response. Depending on the circumstances and the contract’s requirements, the harmed party may seek compensation, damages, or contract termination.

Material Breach

Material breaches involve larger failures. They are serious and get to the heart of the agreement. In a material breach, the contract’s terms are neglected so substantially that the entire purpose is undermined. For example, a homeowner hires a contractor to remodel their bathroom, but the work is never completed even after payments are made.

A well-drafted contract will clearly define what actions constitute a material breach. However, parties that enter into a contract without specifics may need legal help to reach a resolution.

Repudiatory Breach

A repudiatory or fundamental breach is a serious breach of contract that withholds the harmed party’s expected benefits and actively undermines the core purpose of the contract. If a repudiatory breach occurs, the harmed party can:

1. Seek damages and terminate the contract

2. Seek damages, but continue with the contract and their side of the requirements

Note: If the harmed party is able to terminate a contract due to a repudiatory breach, they are not required to uphold their side of the contractual agreement.

Is the contract valid?

First thing’s first: you will want to review the contract and make sure it’s valid. Generally speaking, a valid contract includes an offer, acceptance, consideration, and mutuality. Other factors to consider are each party’s capacity to enter a contract, whether the contract’s purpose is legal, and whether all parties intend for the contract’s agreement to have legal consequences.

While it may seem obvious, a valid written contract should also include signatures that meet the requirements of that jurisdiction. (For example, they may need to be notarized.)

Both oral and written contracts can be breached. It is generally recommended to put contracts in writing, but oral contracts can be considered valid if they meet the requirements discussed above, with the exception of a signature.

Can breach of contract be proven?

In order to take action against a party for breach of contract, the breach must be proven. To do so, the harmed party must prove:

• The party at fault failed to perform per the contract’s requirements. This could mean a complete failure to perform, substandard performance, or a failure to perform within the agreed upon time frame.
• They performed or were excused from their contractual obligations, such as proof of payment, delivery of goods, or completion of services.
• They suffered damages as a direct result from the breach of contract, such as financial or reputational harm.

Does the breach warrant termination?

If a repudiatory breach occurs, the harmed party has the right to terminate the contract under Common Law. But other types of breaches can also lead to termination. The contract in question may contain a provision for termination if certain agreements aren’t upheld.

Have you tried to mitigate harm?

Generally speaking, the harmed party in a breach of contract case has the duty to mitigate their damages. It is your responsibility to do what you can to minimize the losses caused by the breach.

If you retaliate or don’t attempt to mitigate damages, it can reduce the amount of damages you can recover in a lawsuit.

Can the faulting party fix the breach?

Some contracts have a provision that allows the faulting party to attempt to fix the situation. Usually, provisions like this include acceptable solutions and timeframes for remedies.

However, even if the contract does not include a provision for a breach, allowing the other party a chance to remedy the situation can prove beneficial for both parties. In fact, failure to give the party a chance to fix the problem, or to notify them of the contract’s termination, can deem the termination itself unlawful.

Can the parties agree to void the contract?

In some cases, both parties can agree to void a contract and it can be mutually beneficial to do so. For example, if a contract has become financially detrimental for both sides due to unforseen circumstances, voiding the contract can allow both parties to cut their losses and find better, more profitable options.

When a contract is made void, it essentially returns both parties to where they were before the contract. The contract’s terms are cancelled, and any rights or legal obligations that existed in the contract no longer exist.

How sufficient are the damages?

Depending on the amount of money lost, the breach may not be worth the cost of litigation. Try to thoroughly assess the loss before taking legal action.