11 Aug 2023

Breach of Contract Lawsuits Explained

A breach of contract lawsuit might seem simple. Someone fails to uphold their end of an agreement, and that’s that. However, these cases tend to be more complex, with the language of the contract coming into play. 

That’s especially true when you reach the stage of an executive at a company. Below, we explore the various facets of breaches. 

breach of contract lawsuit

What Is a Breach of Contract?

A breach of contract occurs when someone violates any agreed-upon terms or conditions in a binding contract. Breaches can range from a simple late payment to a failure to deliver on the final project. 

When a contract is binding, it holds weight when taken to court. If you can prove the breach, the remedy generally involves the victim receiving what was promised. However, a breach of such a contract is not a crime or a tort. 

As such, it’s rare for a court to require punitive damages for failing to meet an obligation. 

Key Notes to Remember

  • A breach occurs when a party in a binding contract fails to deliver. 
  • Written and oral contracts apply. 
  • Parties in a breach of contract lawsuit can resolve the issue themselves, in mediation, or in court. 
  • There are several types of contract breaches. 
  • A breach is not a crime and rarely results in monetary compensation. 

Understanding Contract Breaches

A common example of a contract breach is when someone does not meet a contractual obligation on time. For example, if someone pays rent late or fails to pay, a tenant might have to vacate the property and repay any rent owed. 

Occasionally, contracts include specific language on how to deal with a breach. For instance, that rental agreement might state that the tenant has to pay a late fee in addition to a missed payment. 

However, the parties in the contract can settle the situation themselves if it is not part of the contract. Common resolutions include drafting a new contract or adjudication. 

Types & Categories 

There are two specific types of breaches, which fall under two categories. 

  • Material breaches involve the victim receiving something different from what is stated in the contract. For instance, say that a firm contracts a vendor to deliver 340 copies of a manual for a conference. Instead, they receive boxes of brochures for a different industry. 
  • Minor breaches occur when someone fails to deliver a service or item by the specified due date. For example, you bring a suit to a tailor to take it in. In an oral contract, the tailor promises to deliver it before your event but delivers it two days late. 

So, what are the categories of a breach of contract lawsuit?

  • Actual breaches occur when a party refuses to meet the terms of the agreement.
  • Anticipatory breaches happen when a party states they will not meet the terms in advance. 

Legal Issues in Contract Breaches

The plaintiff is the individual who initiates the breach of contract lawsuit. First, they must establish the existence of the contract. Then, they must show how the other party failed to meet the requirements. 

The Validity of the Contract

Generally, the existence of a contract is easy to prove. In most cases, there is a written document signed by the parties involved. Still, it’s possible to enforce an oral contract. 

Here’s when to draft a contract instead of using an oral agreement. 

  • Sale of goods over $500 
  • Transfer or sale of land 
  • Agreements that last over a year 

In a breach of contract lawsuit, the court examines the responsibilities of each party. Then, they determine whether there was a failure to meet those obligations. Additionally, they look for modifications that come into play. 

Reasons Behind a Breach

The court assesses whether the reason for a breach is legal. For instance, the defendant can claim that the plaintiff misrepresented the situation prior to signing the contract. 

Alternatively, a defendant may claim they signed the contract under duress. In certain cases, both sides are in the wrong. 

Legal Remedies in a Breach of Contract Lawsuit

Generally, the goal of a contract lawsuit is to ensure the wronged remain in the same economic position they would without a breach. Remedies and damages tend to be limited to the figures present in the contract. 

For instance, at the completion of a contract, the other party owes you $50,000. In reality, you only received $20,000. So, they would owe you $30,000 at the end of the lawsuit. 

Normally, you aren’t able to claim more than what the other party owes you. However, there are certain exceptions in the doctrine of reliance damages.  This triggers additional damages when the breach results in connected losses. 

In these cases, the victim receives additional damages if they did their best to get out of that situation. For instance, if a company buys pool equipment while a contractor fails to finish construction, they might try to sell the equipment to recoup losses. 

Final Thoughts

We draft contracts with the intent that everyone upholds their part. Ideally, the contract provides everyone with peace of mind. However, when someone breaches an agreement, the other party needs a solution to remedy that failure. 

If you are an executive, C-suite employee, or other employee whose company violates their contract, you have rights. Contracts are difficult to wriggle out of, and an attorney can help you explore your options.

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