Contracts are fundamental for many business transactions that involve a second party. These clearly outline the terms that each party must abide by, including specific expectations required for the contract to be completed successfully.
Most contracts are handled without issue, but there are times when one party doesn’t meet its contractual obligations. When this happens, the party that doesn’t meet the terms has breached the contract.
Types of contract breaches
Not all contract breaches are the same. The circumstances surrounding the breach and the way it affects the wronged party determine what type of breach occurred.
The most significant type of breach is a material breach, which occurs when one party fails to complete a key component of the contract. This will essentially undermine the entire contract.
A fundamental breach is similar to a material one but typically refers to a situation where the contract is rendered useless to the other party. It often leads to contract termination and full legal remedies.
Actual breaches occur when the deadline or obligation passes and one party simply doesn’t perform. This is the most straightforward type and often the easiest to prove.
A minor breach, which is sometimes referred to as a partial breach, involves a less serious issue that doesn’t undermine the nature of the contract. This occurs when most of the terms of the contract are met, but there is a small detail that’s missing or delayed.
An anticipatory breach, which happens when one party informs the other in advance that they won’t be able to meet their obligations, is also possible. While nothing has been missed yet, the non-breaching party can usually treat the contract as broken and pursue remedies early.
Contract breaches can sometimes lead to significant harm to the wronged party. They may opt to pursue legal action to help cover their losses. Working with someone familiar with these matters is critical to help protect the business.