What Constitutes a Breach of Contract

 

Signing a contract is all too often an act people do with very little thought. Unfortunately, this can lead to an expensive, difficult situation in the future. It is always better to take time to read and understand a contract before signing it. Depending on the type of contract and reason you are signing it, you should also consider reviewing the document with an attorney prior to signing.

What Happens When a Contract is Not Honored?

When one or more people signing a contract fail to honor all or part of the document, they are said to be in breach of the contract. If you are involved in a contract and you believe the other party has failed to carry out their end, you must prove the following:

• The contract was legal and valid. Valid contracts require both parties to be in agreement, capable of entering into the agreement, behaving legally, and receiving value as a result of the agreement. Unless all four of these criteria are met, the contract is not enforceable.
• You honored the contract. If both parties are in breach, everyone loses.
• The other party failed to honor the contract.
• Damage occurred as a result of the breach.

If breach is proven, the plaintiff is entitled to relief. There are several different options for relief:

Damages

This is the most common relief. Payment is given to the non-breaching party that either creates a comparable situation to the intended outcome of the original agreement (compensatory damages), creates a situation above and beyond the intended of the original agreement (punitive damages), or is payment based on damages that were identified by the parties in the contract (liquidated damages). The final option, nominal damages are for when there is no proof the plaintiff lost money because of the breach.

Specific Performance

When damages alone are not enough, the plaintiff can seek specific performance. This occurs when the breaching party is ordered by the court to perform specific duties.

Cancellation and Restitution

The non-breaching party also has the option of cancelling the contract and suing the breaching party for restitution. This means neither party has obligations under the contract, but might be entitled to an award as determined in legal proceedings.

Do you need assistance creating a contract that is valid and will stand up in court? Do you believe someone with whom you share a contract is in breach? You need legal support. Contact the experienced business lawyers at Miller and Steiert, P.C. for more information.