Remedies Can Vary Based on the Type of Breach
If you’re in business, there’s a good chance you’re involved with contracts on a regular basis. There’s also a strong likelihood that you’ve had another party to a contract fail to honor the terms of the agreement. Although any such failure technically constitutes a breach of contract, there are different types of breach, and they can have different remedies and consequences.
With a material breach, at least one party has received significantly less than promised in the contract. A material breach may involve delivery of nonconforming goods, late delivery, or other failures to perform contractual obligations in a timely manner. Among the questions typically asked to determine whether a breach is material are:
- Was the item or matter involved at the heart of the deal?
- Is there a way to fairly compensate the nonbreaching party?
- Can the breach be fixed without significant loss to the nonbreaching party?
- Did the breaching party act in bad faith?
An anticipatory breach is one that has not actually happened yet but is expected to happen by one or more of the parties. For example, when a contract requires delivery of goods on a certain day, but the party obligated to deliver those goods might indicates (before the delivery date) that the delivery will be late. An anticipatory breach also can occur if circumstances indicate that it will be impossible for a party to meet their obligations under the contract. With an anticipatory breach, the nonbreaching party can treat the contract as though it were already breached.
A minor breach is a situation where a party has not complied with the specific terms of the agreement, and their noncompliance may or may not have caused the nonbreaching party to suffer losses. If the nonbreaching party cannot show negative financial consequences of the breach, the contract will be enforced.
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