Breach of Contract deals with the rights of parties in a binding agreement to either collect damages or sue for specific performance if either party does not perform. Two common forms of contract breach are Minor Breaches of Contract and Material Breaches of Contract.
Minor Breach of Contract
A minor (or partial) breach of contract happens when one party does not fulfill the literal terms of the contract. In cases of minor breach, the victim party may sue for damages but cannot sue for specific performance. We'll use an example of a landscaper and a homeowner.
If a homeowner hires a landscaper to install a specific type of sod in your backyard (for example, Kentucky Bluegrass) but the landscaper installs another kind of sod, you cannot sue for specific performance of tearing out the sod and replacing it, unless the type of sod was a condition to the contract. In this case, if the value of your home were to increase by $10,000 with Kentucky Bluegrass and only $5,000 with the installed sod, you could sue for the difference of the two ($5,000).
Material Breach of Contract
Material breach of contract happens when one of the terms and conditions of the contract is not met. Often, this kind of breach comes into play with the timeliness of contract fulfillment. This kind of breach can be much more costly and can have a much larger impact if you act in good faith on the timeliness of the contract. We'll use another example to illustrate.
A customer contracts out the pavement of a road to a contractor. The contract includes time limitations for the road's completion. The contractor enters into a sub-contract with another contractor to do the preparation work (grading, smoothing, etc.) before the road is paved. Once again, timeliness is a term of the contract. The road preparation is completed on time, but the paving is not. The initial contractor is penalized for not finishing the project on time and passes on the penalty to the sub-contractor.
Now, say the subcontractor contracts out additional work and purchases materials relying on payment for his previous work. He is not paid fairly by the contractor and sues for damages.
The Restatement (Second) of Contracts outlines what kinds of failure to perform constitute breach:
In determining whether a failure to render or to offer performance is material, the following circumstances are significant:
(a) the extent to which the injured party will be deprived of the benefit which he reasonably expected; (b) the extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived; (c) the extent to which the party failing to perform or to offer to perform will suffer forfeiture; (d) the likelihood that the party failing to perform or to offer to perform will cure his failure, taking account of all the circumstances including any reasonable assurances; (e) the extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing.
American Law Institute, Restatement (Second) of Contracts § 241 (1981)
What Can I Do if My Contract Was Breached?
Resolutions to contract breach include mediation, arbitration, and litigation. If your contract has been breached, we recommend you visit with an attorney to discuss what option is best for you. At Sumsion Business Law, we advocate alternative resolutions to litigation, but understand that some breaches are best dealt with in litigation. Come visit us today to learn more about our attorneys and our success in resolving contract disputes.