Contracts are tricky to navigate, especially when changes in internal or external environment prompt a change in cooperation. As an employee you might decide not to follow through on an obligation you signed up for. Or, on the other hand, as an employer you might have found that a party has not fulfilled their expected duties as part of the agreement. But what exactly do these actions (or lack thereof) mean in a legal lens? Whether you are an employee or an employer, it will be useful for you to know the four types of contract breaches you might encounter.
What Is a Contract Breach?
Note that a contract exists if the following elements are present: (1) an offer; (2) an acceptance; (3) a meeting of the minds; (4) a communication that each party has consented to the terms of the agreement; and (5) execution and delivery of the contract with an intent that it become mutual and binding on both parties.
With that in mind, a breach of contract occurs when one or more parties involved in a contract do not honor a binding agreement. The four elements of a breach of contract claim are:
- Existence of a valid contract;
- Plaintiff’s performance or tendered performance;
- Defendant’s material breach (they did not perform their agreement); and
- Damages sustained by the plaintiff resulting from that breach.
If you believe a contract has been breached under these circumstances, you should next evaluate what specific type of breach has occurred to determine the appropriate legal response.
Four Types of Contract Breaches
There are four types of contract breaches recognized by law today:
- Minor breach
- Material breach
- Actual breach
- Anticipatory breach
A minor breach (sometimes called a partial breach) occurs when one party fails to perform some part of the contract even though the specified item or service was ultimately delivered. For example, if a homeowner is seeking window replacements with a specific material requirement but the contractor uses windows of a different material of the same value, this breach would be minor. Aside from the departure from one specific instruction, all parts of the contracted request have nonetheless been completed and delivered.
On the other hand, a material breach happens when one party ends up with something significantly different from what was specified in the contract. For instance, a material breach might be if a client requested a website for selling used books, but the site designer instead created a website for selling candles. In most cases, a material breach means the non-breaching party is no longer required to perform his or her end of the deal and has a right to remedies.
Note that the following must be present to determine whether such a failure to perform is material:
- The extent to which the injured party will be deprived of the benefit reasonably expected;
- The extent to which the injured party can be adequately compensated for the part of that benefit of which they will be deprived;
- The extent to which the party failing to perform or to offer to perform will suffer forfeiture;
- The likelihood that the party failing to perform or to offer to perform will cure their failure, taking account of all the circumstances, including any reasonable assurances; and
- The extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing.
An actual breach of contract is just as it sounds; an actual breach occurs when one party simply refuses to fulfill their side of the bargain by the due date or performs their duties incompletely.
While an actual breach generally examines a refusal to perform that has already occurred, an anticipatory breach refers to an instance when the non-breaching party realizes that the other party of the contract will fail to perform their part of the contract in the future. In this case, the non-breaching party can terminate the contract and sue for damages before the breach actually happens. Oftentimes anticipatory breaches may occur when one party announces in advance of the due date for performance that they intend not to fulfill their side of the bargain.
Whether you have breached a contract, fear you might, or seek to take action against someone who has, it is important to know the four categories of contract breaches so you can seek the proper legal response. Our employment attorneys can help you better evaluate next steps in your case of a contract breach.
Contact us at Shellist Lazarz Slobin LLP for a consultation!