5 Types of Breach of Contract You Need to Be Aware Of

Louis Balla
Louis Balla
Louis is the Co-Founder of Anapact and partner at Nuage, a top rated ERP consulting firm based in Venice Beach, California.
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Contracts are an essential component of business partnerships. As legally binding documents, they ensure that everyone is upholding their end of the deal. If there is a breach of contract, when a party breaks the terms agreed upon, there can be hefty penalties.

There are multiple types of breaches of contract, so it is crucial to familiarize yourself with them to ensure your business avoids them. Fortunately, with the best contract management solutions, you’ll get to stay on top of all your contracts with ease while certifying that you abide by all the terms and conditions you and the other party have set. Here are different kinds of breaches of contract:

  • Minor or Partial Breach

This type of breach is when one party does not perform the responsibilities assigned to them in the contract. If this occurs, you can sue them, but only for “actual damages.” This term refers to the money that will help compensate money or properties lost due to the other party’s breach of contract. The amount is given to you depending on the proven injury, loss, or harm. 

  • Material Breach

A material breach of contract occurs when one party does not follow the obligations stated in the agreement, resulting in the termination of the contract and making that party liable for breach of contract damages. To prove that a material breach has happened, you must present the following:

  • The consequences experienced by the injured party due to the breach
  • The amount that can be paid to the injured party according to the contract’s terms
  • The severity of the other party’s breach of contract
  • The likelihood of the other party being able to perform the failed terms, depending on their circumstances
  • How the other party behaves in good faith
  • Fundamental Breach

A fundamental breach is when one party sues the other party for breaking the contract’s terms, potentially ending the contract. 

  • Actual Breach

An actual breach is when one party doesn’t fulfill the duties stipulated in the contract by the due date.

  • Anticipatory Breach

An anticipatory breach happens when one party has ceased to fulfill their part of the deal, causing the other party to believe that the agreed-upon details will go on to be incomplete. Examples of an anticipatory breach include payment rejection, failing to deliver an ordered product or instances where one or more parties clearly cannot uphold their end of the agreement. The other party may sue the breaching party and terminate the contract.

Elements in a Breach of Contract

You may file a breach of contract if you have a valid contract that is still in effect, whether oral or written. Three elements can help you determine if the contract in question is still valid. The first is the offer, which is the discussion and agreement that the goods and services would be offered in exchange for something the other party wants. The second is acceptance or the arrangement of specific terms between parties demonstrated through a written contract. The last element is a consideration, proving that each party gained something valuable from each other, showing that they entered into an agreement.

How to File a Breach of Contract Claim

To file a breach of contract claim, you can send a contract letter to the breaching party, informing them of your plans to sue if they do not rectify the issue. Doing this will alert them of the urgent changes they must make to continue the agreement. If you intend to file a lawsuit, you must furnish a copy of the letter and other relevant documents to prove your case. You could file a breach of contract claim with the small claims court, but it’s best to speak to an attorney if the contract concerns high-value terms.

Conclusion

It is crucial for all parties involved in a contract to abide by the terms and uphold their end of the agreement. Otherwise, they would be liable for a breach of contract, which can result in expensive lawsuits. By learning the types of breaches of contract, you can ensure that you stick to the agreement and avoid hefty fines.

If you’re looking for easy contract management software, we’ve got you covered at Anapact. We’re an enterprise contract lifecycle management solution designed for small and mid-sized businesses, making contracts much easier with the click of a button. Try our demo today!

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- About the Author

Louis Balla
Louis Balla
Louis is the Co-Founder of Anapact and partner at Nuage, a top rated ERP consulting firm based in Venice Beach, California.