Breaches of Contract: What to Do if You’re Involved in One

When you sign an employment contract, you promise your employer that you will abide by the requirements contained within the contract in exchange for your compensation and other benefits. Paying you this compensation and upholding any other promises made to you in the contract are your employers’ responsibilities. If either party does not fulfill its requirements as they are written into the contract, that party has committed a breach of contract.

A breach of contract is a civil offense, which means it is an administrative violation, rather than a crime. Breaches of contract are a key part of employment law, and if you are involved in one, you might need to take legal action to resolve the issues. There are four categories of breaches of contract: minor breaches, material breaches, fundamental breaches and anticipatory breaches.

Minor Breaches of Contract

A minor breach of contract is defined as any breach of contract where no real harm has occurred through the deviation from the terms of the contract. Basically, this means that although both parties performed as they were supposed to and achieved the desired result, one party’s performance varied slightly from what he or she was required to do.

For example, if a contract stipulates that a drywall installer is to use green drywall in a home, then he uses blue drywall, the installer has committed a minor breach of contract. The homeowner may sue the installer for actual damages, rather than for violating the contract. This type of breach is also sometimes known as a partial breach of contract. The non-breaching party may seek compensation for his or her monetary losses, but he or she is not excused from his or her other obligation in the contract, which in our example, is to pay the drywall installer his wage.

Material Breaches of Contract

A material breach of contract is a much more severe breach than a minor breach of contract. With a material breach of contract, the deviation from the contract’s terms is so great that the non-breaching party has the right to sue the breaching party to compel him or her to complete the job or to receive monetary compensation for its losses caused by the breach.

An example of a material breach of contract is a scenario where a homeowner hires a flooring installer to put down tile in his kitchen. The installer then installs hardwood flooring in the kitchen. The homeowner, although he received a floor for his kitchen, specifically contracted the flooring specialist to install tile because of its durability. Now, his options are to keep the wood floor and live with it warping and becoming discolored through the years or pay to have it torn out and replaced with tile. Because the installer did not comply with the contract, he or she may be sued for non-performance. This is also sometimes known as a total breach of contract.

Fundamental Breaches of Contract

When one of the parties involved in a contract agreement blatantly disregards the contract, it is known as a fundamental breach of contract. This is the most serious type of breach and nearly always results in the non-breaching party having to break the contract. These are also known as repudiatory breaches. When one occurs, the wronged party may sue for both economic damages and to terminate the contract.

An example of a fundamental breach of contract is any scenario where one of the parties involved blatantly disregards one or more of the requirements included in the contract. For example, a contracted employee who signed a non-compete clause, then willingly begins working with a direct competitor while still employed with the first company, has committed a fundamental breach of contract.

Anticipatory Breaches of Contract

This type of breach of contract occurs when one party stops performing its required tasks, leading the other party to reasonably believe they will never be completed.

Examples of anticipatory breaches of contract include cases where the employer stops paying the employee at the intervals scheduled in the contract or the employee stops performing his or her duties. When this happens, the non-breaching party is entitled to terminate the contract and sue the breaching party for monetary damages caused by the breach.

How to Determine Which Type of Breach Has Occurred

In some cases, which type of breach has occurred is not clear. To determine which type of breach occurred, your attorney will approach your claim with the following questions. If your case goes to court, the court will use these same questions to determine an appropriate way to proceed.

  1. Did a contract exist?
  2. What were the contract’s requirements for each party involved?
  3. After the contract was created, was it modified in any way by either party?
  4. Did an actual breach occur?
  5. What was the extent of the breach?
  6. What are the damages caused by the breach?
  7. Does the breaching party have a legal defense against the allegation?

If You Experience a Breach of Contract

Work with an attorney to take legal action against the breaching party. The first thing you need to do is provide the breaching party with a notice of breach, which is a document that states the date and nature of the alleged breach. In this document, outline the problem and offer a way for the breaching party to correct it. In many cases, breaches of contract can be resolved without going through the court system.

If yours cannot be resolved without further legal action, you may end up having to work out the breach through mediation, arbitration or litigation. Some contracts stipulate that the parties must attempt to resolve all breaches through arbitration before going to court. If this is the case, your attorney can guide you through the next steps. If you do have to bring your case to court, work with your attorney to develop a legal strategy to have your case satisfactorily resolved.