Maybe the job you contracted out to a handyman wasn't completed in time or up to local standards. Maybe your employer didn't pay you for all the hours you worked. Perhaps you bought something from an online seller that was supposed to be in 'like new' condition, but it arrived looking like it survived a tough time in the trenches.
In each scenario, you're clearly the victim of an obviously broken contract, but the tricky part is determining what type if contract breach occurred and what remedies are legally available to you. Generally speaking, there are four types of contract breaches: anticipatory, actual, minor and material.
Anticipatory breach vs. actual breach
Most breaches of contract fall into one of two categories. They can either be considered actual breaches or anticipatory breaches. An actual breach occurs when one person refuses to fulfill his or her side of the bargain on the due date or performs incompletely. Anticipatory breach occurs when one party announces, in advance of the due date for performance, that he intends not to fulfill his side of the bargain.
Both actual and anticipatory contract breaches are bad news for the individuals and organizations at hand. They can waste both money and time, and certainly lead to frustration for everyone involved. That doesn't mean there aren't remedies in either case. A breach of contract, no matter what form it may take, entitles the innocent party to maintain an action for damages.
Minor breach vs. material breach
Breaches of contract can also be minor or material. A breach is likely material if one party ends up with something significantly different than what was specified in the contract. For example, if you contact with a web designer to build a new site for home cafe, but end up with a blog about bagels that doesn't even mention your place, the breach is probably material. In most cases, a material breach means the non-breaching party is no longer required to perform his or her end of the deal and has a right to remedies.
A minor breach, sometimes called a partial breach, can be a big deal, too. In many cases, a minor breach means that one party failed to perform some part of the contract even through the specified item or service was ultimately delivered. Consider the cafe website contract. If the finished product met all the client's demands but was completed a day after it was requested, the breach might be considered minor. Unless the initial contract terms specifically mentioned that 'time is of the essence' or that the website was under a tight deadline, a reasonable delay from the web designer would only be considered a minor breach.
What's next: Types of remedies for broken contracts
If you're the victim of a breach of contract, there are a handful of remedies available to you. Damages are monetary rewards or remedies intended to make up for any loss experienced because of the breach of contract.
Compensatory damages are damages for a specific amount of money intended to compensate the non-breaching or innocent party for losses from the breach. There are two types of compensatory damages:
- Expectation damages might cover what you intended to get out of the contract, based on the contract itself or market value. For example, if your employer neglected to pay you for additional hours worked not covered by your regular salary, damages would be calculated based on the overtime policy outlined in your employment contract.
- Consequential damages are a little bit trickier to deal with, as they're intended to cover indirect damages. For example, if your cupcake bakery loses profits for a week because of an undelivered oven, you might be able to collect consequential damages. In this case, the damages must come specifically from the breach and be reasonably foreseeable for everyone entering the contract.
Breach of contract cases might be overwhelming, but they're also something many individuals and small businesses are likely to encounter at some point down the line simply because contracts are so prevalent in today's world. No matter whether you're running a business, accepting a new job or even swiping a credit card in exchange for a bag of groceries, contracts are an unavoidable part of life. Being well-informed about contract breaches and remedies can help you keep your cool as you navigate through the legal landscape.
And remember, you can always start a business contract by completing our simple step-by-step interview.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.