Contracts are the cornerstone of many business transactions. They lay out the expectations from both parties, so each one knows exactly what they’re responsible for. Many contracts conclude with both parties being fully satisfied with how it went. But, there are some instances in which the terms aren’t satisfactorily met, which is known as a breach.
Because contracts are binding, they must be followed as intended. There’s a chance that a breach of contract could end up being a litigated matter, particularly if there’s no clause that requires an alternative dispute resolution method.
Types of breach of contract
Not all breaches of contract are the same. There are distinct types, each of which can affect the harmed party in a specific manner.
- Actual breach: One party purposefully doesn’t meet the terms of the contract
- Anticipatory breach: One party alerts the other to a potential breach that’s coming
- Minor breach: One party doesn’t meet contract terms but it doesn’t defeat the purpose of the contract
- Material breach: One party doesn’t meet the contract terms in a way that undermines the entire contract
The breach can be actual or anticipatory and minor or material. For example, a contractor alerting a business owner that an office remodel will be completed three days past the contract deadline would be an anticipatory minor breach if the contractor let the business owner know well in advance.
When legal action is necessary
Typically, minor breaches are handled between the parties and won’t result in any legal action. Material breaches are the ones that are most likely to result in legal action because these are the most serious ones.
Taking legal action is usually only a factor when the harmed party suffers significant loss. They may opt to pursue this option to help them offset the financial damages that they’re dealing with because of the breach.
A breach of contract lawsuit can be complex because of the intricacies that are often present. Working with someone who can assist with this matter is critical so the business owner can focus on continuing to run the business while the contract breach is handled.