Types of Contract Breaches

All business owners are aware that contracts are an important part of being successful. Contracts are necessary to procure and render services or goods from vendors. A company’s written agreements set forth the terms and expectations for the parties involved, allowing you to know what can be expected in your business dealings. Additionally, if a party you have a contract with violates the terms of the agreement, you have recourse to file a legal action and recoup your damages.

In the business world, breach of contract claims are a common occurrence. A breach of contract can occur for a wide variety of reasons. It is important to understand what type of contract breach you are dealing with and how to best pursue your remedies. Below are the four types of contract breaches:

Actual Breach. An actual breach occurs when a party to the contract fails to complete their obligation within the specified time, or if they only complete a portion of their obligations. A very common actual breach is the failure to make payment on time.

Material Breach. This type of breach occurs when there is a failure to perform an obligation that strikes so deeply at the purpose of the agreement that it renders the contract to be “irreparably broken.” This may occur when a party delivers something that is significantly different than what was required by the contract.

Anticipatory Breach. An anticipatory breach occurs when one party reveals, intentionally or unintentionally, its intention to fail to fulfill its contractual responsibilities.

Immaterial Breach. This type of breach occurs when one party fulfills their contractual obligation, but not in an acceptable manner. For example, the goods or services provided are delivered late or incompletely or otherwise not as set forth in the contract.

It is important to review your contracts and fully understand your entity’s obligations as well as the other party’s responsibilities so you can avoid breaches and understand when one has occurred.

When a breach of contract occurs, it is important to explore all your options for resolving the dispute. Litigation is costly and time consuming, so it should be a tactic of last resort. Contact Mailly Law today to schedule your initial consultation.