Businesses use contracts as a way to set legally binding expectations for a variety of interactions. Both parties should read the contract to ensure they understand their responsibilities, the other party’s responsibilities and what will happen if either party fails to meet them.
When conditions of a contract aren’t met as required, a breach of contract occurs. This can happen for various reasons, some of which are associated with consequences. Four distinct types of breaches may occur:
1. Material breach
This is the most serious type. A material breach occurs when one party receives significantly less or different results than what was agreed upon. For example, if a contractor agrees to build a deck with a specific type of wood but uses a cheaper substitute, the client may consider this a material breach because it defeats the purpose of the deal.
2. Minor breach
Also called a partial breach, this happens when most of the contract is fulfilled but there’s still something left undone or not done exactly as specified. Imagine hiring a photographer for an event who delivers the photos a few days late. If the quality is still there and the delay didn’t cause harm, that’s likely a minor breach.
3. Anticipatory breach
This one occurs before the performance is even due. If one party makes it clear they won’t be fulfilling their part of the agreement, the other party doesn’t have to wait for the deadline to take action. A common example is when a supplier notifies a business ahead of time that they won’t be delivering goods as promised.
4. Actual breach
An actual breach is straightforward: a party fails to perform their obligations by the due date or performs improperly. For instance, if rent is due on the first of the month and payment isn’t made, that’s an actual breach of the lease agreement.
Any company that’s dealing with a breach of contract should explore their legal options. This may help them to recover the damages they’re dealing with because of the breach. Working with someone who’s familiar this type of situation and who can assist with litigation to resolve the matter may be beneficial.