What Is a Breach of Contract?
Discovering that a business agreement has gone awry is frustrating, to say the least. When one party fails to uphold their end of the deal, it can leave the other party feeling helpless and uncertain of what to do next. Enforcing a contract is a critical element of any legally binding agreement, and both parties expect to benefit from it. However, when one party fails to deliver, it can be a frustrating and costly experience.
The developments in the Partner Reinsurance Co. v. RPM Mortgage, Inc. case highlights the importance of understanding breach of contract and seeking legal counsel when necessary. In 2017, RPM Mortgage allegedly failed to fulfill its obligations under a contract with PartnerRe, leading to a lawsuit. After an eight-day bench trial, a Manhattan Federal Judge awarded PartnerRe $10.8 million in damages plus $3.5 million in prejudgment interest.
At the end of the day, a breach of contract can have significant financial and operational impacts on a business. So, understanding contract breaches is crucial for protecting your rights and interests, whether you are a business owner, technical executive, or manager.
Definition of Breach of Contract
Contracts and agreements with stakeholders are the backbones of a business, providing a framework for legal agreements between parties. However, when one party fails to fulfill their obligations under a contract, it can lead to a breach of contract. A breach occurs when one party fails to perform a material term or condition of the contract, causing the other party to suffer harm.
There are three primary forms of breach of contract
- Defective performance occurs when one or both parties partially perform the contract but not to the required standard.
- Delayed performance: This happens when a party fails to perform their obligations within the stipulated and expected timeframe.
- Complete non-performance occurs when a party does nothing to perform the contract.
A breach of contract can result in significant financial and legal consequences for both parties. Hence understanding the nuances of breach of contract and how they can affect a contract’s performance is essential for any business owner, executive, or manager.
Elements Required for a Valid Breach Claim
To successfully claim a breach of contract, four elements must be present:
- Valid Contract: A valid contract must exist, which typically includes the following:
- An offer
- Acceptance of the offer by both parties
- Intention to create legal relations
- Execution and delivery of the contract.
If any of these elements are missing, the contract may be invalid.
- Performance: The plaintiff must prove that they fulfilled their obligations under the contract and the other party failed to perform their end. The defendant must have a valid justification for failing to act.
- Breach of Contract: The plaintiff must demonstrate that the defendant breached the terms of the contract by failing to perform as specified or performing otherwise.
- Damages: The plaintiff must show the court that they suffered actual damages from the breach of contract, usually in the form of monetary losses.
For a breach of contract claim to be successful, all four aspects must be fulfilled.
Remedies for Breach of Contract Claims
When one party breaches a contract, the other party has legal options available to them to remedy the situation. The appropriate remedy will depend on various factors, including the contract terms, the nature of the breach, and specific circumstances of the case. The potential remedies for breach of contract claims are:
- Frequently awarded types of damages in legal disputes are compensatory damages. remedy for breach of contract claims, designed to compensate the non-breaching party for the losses incurred due to the breach. This remedy includes two types of damages:
- Expectation damages (also known as general damages): The purpose of these damages is to restore the non-breaching party to the position they would have been in had the contract been fully executed.
- Consequential damages: These damages flow naturally from the breach and can be claimed if the non-breaching party can prove that they were foreseeable.
- Specific performance: This remedy requires the breaching party to perform their obligations under the contract. Specific performance is only available in limited circumstances, such as when the subject matter of the contract is unique or when monetary damages would be inadequate.
- Injunction: This remedy is similar to specific performance, but instead of requiring the breaching party to perform their obligations, it prohibits them from taking certain actions. Injunctions are only available in limited circumstances, such as when irreparable harm would result if the breaching party was allowed to continue with their actions.
- Rescission: This remedy allows the non-breaching party to cancel the contract and be released from their own obligations. Rescission is typically only available if the breach is material and the non-breaching party can show that they did not receive what they bargained for.
- Liquidated damages: This remedy allows the parties to agree in advance on a specific amount of damages that will be paid in the event of a breach. Enforceability of liquidated damages is typically contingent upon whether they reasonably estimate the actual damages resulting from a breach.
- Nominal damages: This remedy allows the non-breaching party to recover a small amount of damages, even if they cannot prove that they suffered any actual harm as a result of the breach. Nominal damages are typically only awarded in cases where the non-breaching party can prove that a breach occurred but cannot prove that they suffered any actual harm.
How an Attorney Can Help with Breach of Contract Cases
When one party fails to fulfill their contractual obligations, it can result in significant personal or financial harm to the other party. In such situations, the services of an attorney can be essential to obtain legal remedies or enforce the terms of the contract in court.
Here are some ways an attorney can help you with a breach of contract case:
- Review and Amend the Contract: An experienced attorney can review the contract to identify any broad or vague clauses that may lead to disputes in the future. They can help amend the contract to ensure that it is clear, concise, and enforceable in the courts.
- Explain Legal Remedies: In the event of a breach of contract, an attorney can advise clients on the types of legal remedies available to them, such as specific performance or monetary damages. They can also help clients determine the most appropriate course of action based on the specific circumstances of the breach.
- Defend the Contract: An attorney can help clients defend the validity of the contract and explain how the breach resulted in damages or losses. They can also assist clients in pursuing legal action against the breaching party.
- Seek Appropriate Remedy: An attorney can help clients seek the appropriate remedy for the breach of contract, whether it be through negotiation, mediation, or litigation. They can also help clients understand the potential risks and benefits associated with each course of action.
- Save Time and Effort: Hiring an attorney to handle a breach of contract case can save clients the time and effort required to argue their case. An experienced attorney can provide clients with a comprehensive understanding of the legal aspects of their claims and help them navigate the complex legal process.
A breach of contract can have serious consequences for all parties involved. With the help of an experienced attorney, you can protect your rights and seek the appropriate remedy for any damages or losses suffered as a result of the breach.
How Long Do You Have to File a Breach of Contract Claim?
The statute of limitations for a breach of contract is one year from the date of the alleged breach of contract. The statute of limitation may vary across states.
If you feel aggrieved by the actions–or failure thereof–of another member to the contract, you can file a breach of contract claim. An attorney can help you review the contract terms and the steps leading to the breach of the contract. Contact an experienced contract attorney or call our office at (504) 294-5094 to file your claim.