What Types of Contract Breaches Can Litigation Address?

Contractual issues are one of the most common reasons why a company may pursue business litigation. Entering into a legal contract with another party will put protections in place, and both parties will be required to fulfill the terms of their agreement. However, there are many situations where one party may violate a contract’s terms, and they may do so out of negligence, such as by performing substandard work; because of circumstances beyond their control; or in an intentional attempt to cause the other party to suffer financial harm. Different types of contract breaches may be approached differently, and business owners will need to understand how the laws will address these types of breaches during litigation.

Minor Breach Vs. Material Breach

The way a contract dispute will be approached will usually depend on the seriousness of the alleged breach. In a minor breach of contract, a party may partially fulfill some of the contract’s terms while failing to fully meet their obligations. For example, a purchase contract may state that goods will be delivered by a certain date, but the vendor may only be able to deliver 90 percent of what was ordered by that date. In these cases, the parties may be able to reach an agreement on how to resolve these issues, such as by offering a discount on the 10 percent of the goods that were not delivered on time.

A material breach of contract will be more serious, and it will usually involve a violation of the contract’s terms that is so severe that it defeats the purpose of the contract. Examples of this type of breach may include situations where one party performs work as specified in a contract, but the other party fails to pay for this work. When pursuing litigation to address a material breach of contract, a party may seek compensation for any losses that were directly or indirectly caused by the breach.

Anticipatory Breach Vs. Actual Breach

Contract litigation may also need to address whether a breach has already occurred or whether either party believes that it will occur in the future. In many cases, a party will seek to address an actual breach committed by one party. However, an anticipatory breach may occur in which one party informs the other that they will be unable to meet the contract’s terms. For example, a construction firm may determine that it will be impossible to complete work on a real estate development project by the date specified in a contract, and by informing the other party of this anticipated breach, the parties can determine whether they will need to modify or cancel their agreement.

Sources:

https://www.investopedia.com/terms/b/breach-of-contract.asp

https://www.contraxaware.com/blog/types-of-breach-of-contract-with-examples/

https://www.thebalancesmb.com/breach-of-contract-398138