WHAT CONSTITUTES A BREACH OF CONTRACT

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A breach of contract occurs when one party to a legally binding agreement fails to fulfill their obligations as specified in the contract without a valid legal excuse. The legal significance of a breach of contract is heavily reliant upon the particular factual circumstances and how those circumstances are addressed by the applicable law.

The fundamental aspect of a breach of contract is a failure to perform a promised obligation that is set forth in contract, which can include:

• Non-performance: A complete failure to do what was promised. For example, a contractor who is hired to build an internet-based platform but never starts the work.

• Partial performance: Doing some of what was promised, but not all of it. For example, a supplier who is contracted to deliver 10,000 units of a product but only delivers 7,500.

• Defective performance: Performing the obligation, but in a way that is of substandard quality or doesn't meet the agreed-upon specifications. For example, a technology development firm who designs a computer app that is full of bugs and doesn't function properly.

• Delayed performance: Completing the obligation after the deadline specified in the contract. This is particularly significant if the contract includes a "time is of the essence" clause.

The legal consequences of a breach often depend on its severity. Courts and contracts typically distinguish between a few main types of contractual breaches:

• Minor (or Partial) Breach: This is a less serious violation where a party fails to perform a small, non-essential part of the contract. The non-breaching party can still get the main benefit of the contract. For example, a vendor delivering products a day late when the contract didn't specify a "time is of the essence" clause. In this case, the non-breaching party may be entitled to compensation for any damages caused by the delay, but they are generally not released from their own contractual obligations.

• Material (or Fundamental) Breach: This is a serious violation that goes to the heart of the contract. It substantially deprives the non-breaching party of the benefits they were supposed to receive. For example, a caterer who is hired to provide food for a wedding but fails to show up. A material breach is so significant that it often gives the non-breaching party the right to terminate the contract and sue for damages.

• Anticipatory Breach: This occurs when one party clearly and unequivocally indicates, either through their words or actions, that they will not be able to perform their contractual obligations before the performance is due. For example, a supplier sends a letter stating they will not be able to deliver the goods on the agreed-upon date. The non-breaching party can then immediately sue for damages without having to wait for the actual breach to occur.

With this basic overview as to some of the key legal considerations associated in distinguishing between various forms of contractual breaches, certain important considerations in relation to "breaches of contract" include:

• The Contract is Key: The specific terms of your contract will define what constitutes a breach. A well-drafted contract will explicitly outline obligations, deadlines, and what happens if those are not met.

• Severity Matters: The legal remedies available to the non-breaching party (such as the ability to terminate the contract or the amount of damages they can claim) are directly related to the severity of the breach.

• Legal Excuse: A failure to perform is not a breach if there is a valid legal excuse, such as the contract being frustrated by a "force majeure" event (like a natural disaster) or if the other party's actions prevented the performance [more on legal excuse].

For knowledgeable and experienced legal representation in negotiating, drafting and reviewing business contracts, and where circumstances warrant, enforcing, or otherwise dealing with interpretation of, contracts, we welcome you to contact our law firm by email at Chris@NeufeldLegal.com or by telephone at 403-400-4092 / 905-616-8864.

 

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What Constitutes a Breach of Contract? A breach of contract occurs when one party to a legally binding agreement fails to fulfill their obligations as specified in the contract without a valid legal excuse. The legal significance of a breach of contract is heavily reliant upon the particular factual circumstances and how those circumstances are addressed by the applicable law. Read more . . .