Breach of contract B2B

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 which has been carried out or goods which 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 which 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)
• 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.

It’s often best to first try and come to an agreement or resolve a dispute without taking formal action. Try and use methods of Alternative Dispute Resolution (ADR) such as mediation or arbitration which is more cost effective than litigation. For further information read Alternatives to legal action if the breach concerns non-payment of money owed. If you are located in England and Wales and the sum is less than £100,000 you may be able to use the Money Claim Online service. In other cases, you should Ask a lawyer for advice; but the first step will often be to issue a letter before action.

Some of the potential defences to a breach of contract claim include:

• the term which is used as the basis of the claim is vague or unclear
• the claim is unfounded or incorrect
• losses being claimed for were not reasonably foreseeable - or the claimant has not attempted to mitigate their losses
• the contract does not apply (eg it relates to a different party) or was not correctly formed
• the other party has accepted the breach of contract

It's always best to try and resolve a dispute before resorting to litigation. However, the main remedies for breach of contract are:

• repudiation - it is possible to cancel or terminate the contract altogether if a term is breached, and claim compensation for any loss suffered
• damages - these can be awarded for both quantifiable losses (eg loss of profits) and unquantifiable losses (eg inconvenience suffered) resulting from the breach
• specific performance - this is a less common remedy which requires a party to carry out certain obligations under a contract (ie the court forces the party to fulfil their obligations)
• adherence - in Scotland, the innocent party may also require the other party to adhere to their contractual obligations