In Business Law

Introduction

Definition

A breach of contract occurs when a party to a contract fails to perform their promised obligations under the agreement, entitling the non-breaching party to relief.

Claim Option

In order to recover on a breach of contract claim, first, a valid and enforceable legal document must have existed. Although this may seem simple, this fact is often overlooked. It is important to be aware of what distinguishes an ordinary, non-binding promise or favor from a formal agreement giving rise to legal duties: Whereas a promise is typically a one- sided commitment made by one party to another, enforceable contracts are mutual, bargained-for exchanges for the benefit of both parties.

Example

A neighbor offers to water your flowers while you are away on vacation because of your friendly relationship. This is only a promise, and if your neighbor forgets or refuses to water your flowers while you are away, there is no legal recourse. If instead, your neighbor offers to water your flowers while you are away for $100 and you accept in writing, then a written contract has been created due to the exchange of benefits, or consideration, to both parties. In the latter scenario, if the neighbor accepts payment but does not perform, they have breached the contract.

Types

What Does a Breach Look Like?

Breaches take many different forms, and can determine the type of recovery you may expect to receive as the non-breaching party. A breach can be total or partial, depending on the degree of deviation from the original agreement by the breaching party.

Total Breach

Occurs when a party wilfully breaches one of the material terms of the contract; the term that induced you into entering into the agreement.

Partial Breach

Occurs when the breaching party deviates from a nonmaterial, or non-crucial obligation of the contract.

Example

If you hire someone to paint your living room, and they accept payment but refuse to perform, there has been a total breach of contract. If instead, during the course of performance, the person you hire to paint your house uses a paint roller when the contract calls for a paint brush, this deviation from the terms of the contract constitutes a partial, or minor breach.

Recovery

image of torned contract

What could become a disaster can be avoided entirely when there is a clear, well-written and signed contract in place.

Compensation

The overall goal of contract law is to restore the injured party to the position they would have been in had the breach not occurred. Therefore, the default remedy available for contract breaches is economic or monetary damages, and with very rare exception, contract law does not allow for punitive damages, or additional compensation as a way of punishing the breaching party. Typically, recoverable damages are limited to the amount listed in the contract.

Specifics

In cases where the subject of the contract is unique, or where monetary compensation is insufficient in rectifying the harm caused by the breach, the court may order specific performance, compelling the breaching party to abide by the terms of the particular contract. For example, if you had contracted to purchase a one- of- a- kind sculpture and the seller breaches, the court may order specific performance compelling the seller to convey the artwork.

Duty to Mitigate

Harm Limitation

While you may have been wronged by a breaching party, it is important to still be mindful of the duty retained by a non-breaching party to mitigate their damages. Upon a total or partial breach, this duty requires a non-breaching party to take reasonable steps to limit the harm they suffer from the breach.

Example

If a developer breached a contract with a builder for a brand new housing complex, the builder would have to take reasonable measures, i.e. selling the unused building supplies, to mitigate its loss.

Business Contract Attorney

To ensure that agreements are honored and expectations are met, contracts are fundamental to the business world. It is crucial for all parties involved in contractual arrangements to understand what constitutes a breach of contract and the potential consequences. Learn more with our business contracts 101 guide, and remember that consulting with a local business attorney is essential to making certain your contracts are well-drafted and compliant with South Carolina business law, minimizing the risk of breaches and their potential repercussions. Here at Henderson & Henderson law firm in Charleston, we are happy to help you do so. Call us today (phone: (843) 2123188) or contact us.

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