If any of the terms of a contract between two businesses are ignored, incorrectly performed, entirely broken or only partially fulfilled, this may constitute a breach of contract. Common examples include failure to provide services or goods paid for and non-payment of invoices relating to work that has been carried out or goods that have been delivered. There are different types of breach of contract, including:
- minor - if the breach results in a relatively small consequence (eg a website design firm has delivered a website that works in most respects but has some problems with formatting, the wrong shade of colour and a couple of broken links)
- material - a breach that is ‘serious in the wide sense of having a serious effect on the benefit which the innocent party would otherwise derive’. This means that the breach of contract is so serious that a party to the contract can't benefit from what was originally agreed in the contract (eg the website navigation is broken, text is illegible and does not work on smartphones - so therefore many potential customers are unable to use it and the business doesn't benefit from what was agreed)
- fundamental - the breach is so severe that the contract can be terminated instead of the innocent party seeking damages (eg a builder abandons a worksite allowing the innocent party to end the contract)
- anticipatory - if it becomes clear and anticipates that one party will not fulfil their duties under a contract (eg there has not even been a mock-up of the website design by the time of the agreed go-live date)
It is possible that a series of minor breaches can constitute a material breach.