You likely enter a business contract with another party for mutually beneficial purposes. You anticipate that everyone will perform under the agreement for a successful business relationship. However, this does not always happen.
A party’s breach of contract can take different forms, depending on the facts. Furthermore, a contract breach can have consequences both big and small. You can read more about the types of contract breaches (with examples) and obtain a further understanding of their potential outcomes under Florida contract law in this article.
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What is Breach of Contract Law?
A breach of contract is the legal term for when a party fails to perform its obligations under the agreement. Exactly what constitutes a breach of contract will depend on your specific circumstances (e.g., the written contract, the parties' intent, any applicable state law, and other facts).
The law for a breach of contract generally comes from the state’s common law (i.e., the precedent from cases) where the contract happens. Depending on the nature of the contract and the breach, other state business laws can also apply (e.g., Florida’s noncompete and NDA statute). The purpose of breach of contract laws is to create a framework for interpreting contracts between parties that provides equitable outcomes.
Breach of Contract Definition According to Cornell Law’s Legal Information Institute
The breach of contract meaning, according to Cornell Law School’s Legal Information Institute, is:
“The violation of a contractual obligation. One may breach a contract by repudiating a promise, failing to perform a promise, or interfering with another party's performance.”
What is a Breach of Contract Lawsuit?
A lawsuit for a breach of contract is a type of legal action that allows a party to recover losses or prevent further damage when another party violates the terms of an agreement.
The lawsuit generally begins in a state or federal court with a complaint from the damaged party. After the complaint, you may have a discovery phase (where the parties exchange information), pretrial motions, and a trial that ends with a judgment. The parties may settle the dispute prior to a final court judgment. The process can take anywhere from months to years, depending on the complexity and depth of the lawsuit.
Some contracts and states may require the parties to engage in alternative dispute resolution methods before filing a lawsuit when a breach or conflict occurs. These methods might include arbitration proceedings or working with a certified mediator.
What Could Breach of Contract Consequences Be?
A few different consequences and legal remedies can result from a successful lawsuit showing a party's breaching a contract.
Compensation for the Damaged Party
One of the most common remedies is monetary compensation to reimburse the damaged party for any losses. This compensation could come directly from the contract as liquidated damages (i.e., a predetermined dollar amount that the parties agree to pay for a breach of contract). The compensation could also come from a court order that considers any other losses from the damaged party – this is more common in contract disputes without a liquidated damages clause.
A Court Can Impose an Injunction Against the Breaching Party
In addition to compensation, the consequences for a breach of contract could include other things. For example, a court order could impose an injunction on the breaching party. An injunction is a ruling that prohibits a party from continuing certain conduct (i.e., whatever the party was doing to breach the contract).
A Breach Can Void the Contract
A breach can also void the entire contract – either through the terms of the contract, or by a court order. The outcome of a party’s breach that voids a contract will depend on the written language (such as the applicability of an integrated contract) of the deal and what is equitable under the circumstances. The parties may no longer have to perform their obligations under the contract. Additionally, you might have to reverse the outcome of previously performed obligations (e.g., repayment of money).
A Ruling Can Force the Breaching Party’s Specific Performance
In rare cases, a court may impose the legal doctrine of specific performance on the breaching party. Under a ruling for specific performance, the breaching party must perform their obligations under the contract. Courts are hesitant to impose this obligation on a breaching party, but it is possible in cases involving real estate or other property that you can’t easily replace.
What Are the Different Types of Breach of Contract?
Not all breaches are the same, and different types exist that carry different meanings under the law. Here, you’ll read more about the different types of contract breaches and see some hypothetical examples to illustrate the concept.
The 4 types of contract breaches are:
- Material breach of contract
- Minor breach of contract
- Anticipatory breach of contract
- Actual breach of contract
What Is a Material Breach of Contract?
A material breach of contract is a fundamental breach that focuses on the severity of the outcome. You can think of a material breach as an action or inaction that results in something substantially different from what the parties expected. Contracts will ideally express the terms of an agreement that would be a material breach if not performed. These are the elements of a contract that are so essential to the contract, they defeat its purpose when breached.
Unfortunately, conflicts arise all the time when a contract is silent on the materiality of an important term – leaving it to judges to decide in a lawsuit. The consequences for a material breach might involve terminating the contract in addition to compensatory damages.
What Is a Minor Breach of Contract?
A minor breach of contract occurs when the parties largely perform all obligations under the contract, with small exceptions or variances. You may also hear a minor contract breach referred to as a partial breach or an immaterial breach. Despite a minor breach of contract, the contract is mostly still intact. As a result, consequences will often be less severe, or even nonexistent.
What Is an Anticipatory Breach of Contract?
Also known as anticipatory repudiation, this type of breach occurs when a party provides notice of its inability to perform under the contract. In response, the non-breaching party takes action that would – under normal events – be a breach of the contract. Anticipatory breaches can be difficult to assess and can cause conflict over which party breached the contract first.
What Is an Actual Breach of Contract?
In contrast to anticipatory repudiation, an actual breach of contract is when one party failed to perform under the terms. The actual breach can be material or immaterial in nature.
Legal Breach of Contract Examples
Here are some hypothetical examples of breach of contract for material, minor, anticipatory and actual breaches.
Material Breach of Contract Example
Let’s imagine you hire a catering company to serve fresh food and drinks for a party you’re having on Saturday. You order a certain amount of food and drinks for delivery on Saturday and pay for the time of a few staff to serve on the evening of the party. However, the catering company delivers the food on Friday, and the staff doesn’t arrive the following day to serve the food. You end up serving the food to your guests instead of being able to enjoy the party.
At the very least, you have a material breach with respect to the staff that didn’t arrive to serve the food. With respect to the delivered food, you may have a debate over whether the catering company’s conduct was a minor breach and not material to the deal (discussed more below).
Material Breach of Contract Remedies
The remedies for a material breach can include: liquidated damages, reimbursement, specific performance, an injunctive order, voiding the contract, or any other equitable relief.
Minor Breach of Contract Example
Sticking with the catering example, let’s assume the caterer followed through and delivered the food and staff for the party on Saturday. However, the caterer was out of the three dozen mozzarella sticks you ordered as an appetizer. Alternatively, the caterer replaced the mozzarella sticks with three dozen oysters (a more expensive appetizer option). The party guests ate the oysters, and no other problems occurred.
You likely have a minor breach because the caterer didn’t provide the exact food, but the consequence was immaterial to the performance of the contract.
Minor Breach of Contract Remedies
The remedies for a minor breach can include: liquidated damages, reimbursement, an injunctive order, or any other equitable relief.
Anticipatory Breach of Contract Example
Let’s suppose the caterer, a few hours before the party, calls saying they might be late to the party because of traffic. You respond by saying the deal is off and that you refuse to pay for the food the caterer already prepared. It’s not clear whether the caterer will perform, but their phone call creates an anticipatory breach – allowing you to mitigate damages by canceling and refusing to pay.
Anticipatory Breach of Contract Remedies
The remedies for an anticipatory breach can include: liquidated damages, reimbursement, specific performance, an injunctive order, voiding the contract, or any other equitable relief.
Actual Breach of Contract Example
You pay for the catering services, but no food or servers arrive for the party on Saturday. You make other arrangements for food. The caterer’s failure to perform is an actual breach that might result in a repayment of money and other damages.
Actual Breach of Contract Remedies
The remedies for an actual breach can include: liquidated damages, reimbursement, specific performance, an injunctive order, voiding the contract, or any other equitable relief.
Need Help With a Legal Breach of Contract Claim?
Cueto Law Group is a Miami-based, boutique law firm whose attorneys handle matters involving commercial transactions and litigation. The firm – founded by international business attorney Santiago Cueto – regularly provides legal advice to clients in contract defenses, and breach of contract cases.
If you need help settling a contract dispute or pursuing a breach of contract claim, please do not hesitate to contact our office. We can schedule a consultation to learn more about your legal needs and how Cueto Law Group may help.
Contact Cueto Law Group today to schedule a consultation concerning a breach of contract dispute.
