A breach of contract dispute can occur where one party fails in their obligations under an agreed contract, which can then give rise to a claim for compensation or other remedies depending on the terms of the contract. Breach of contract can have a significant impact on the parties involved, and it is the far-reaching nature of this impact that can cause breach of contract disputes to become particularly complex and potentially costly. If a contract can be shown to have been breached, damages may then be liable by the breaching party. You will need to prove that the contract has been breached by showing that certain criteria have been met and in this article, to prove breach of contract, we take a look at the process and options available.
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What is a contract?
A contract is a promise or an agreement between two or more parties that is legally binding. It can be made in writing or by oral agreement. There must be a clear intention by both parties to the contract that they will be bound by its terms and it can only be considered to be realised if an offer is made to one party which is subsequently accepted by the other party.
In order for a promise to become a legally binding contract, the following three elements must exist:
- An agreement – which is created by the offer and acceptance of specific terms or obligations.
- An intention to create legal relations and form an agreement that is enforceable by law.
- Consideration – where one party promises to do something in return for receiving a right, interest or benefit promised by the other party.
What is a breach of contract?
A contract can be breached if it is written or an oral contract. There are a number of ways in which a contract can be breached and these include:
- If a party refuses to perform their duties set out in the contract
- If the work carried out is defective
- Due to not paying for a service or not paying within the limits specified
- From a failure to deliver goods or services
- From being late with services without a reasonable excuse
A breach of contract will normally fall into any of four categories: minor, material, repudiatory, and anticipatory.
A minor breach of contract
Also referred to as partial breach, it is a breach of contract that is less severe than a material breach and it gives the wronged party the right to sue for damages but does not usually excuse him from further performance.
A material breach of contract
A material breach of contract is where the breach has serious consequences on the outcome of the project where a party would not have entered into the contract if they could not have guaranteed this term.
A Repudiatory breach of contract
A fundamental or repudiatory breach of contract is where the severity is such that the contract can be terminated instead of the innocent party seeking damages.
An anticipatory breach of contract
This type of breach is one where a party expressly communicates that they will not be carrying out a term or condition of the contract.
Damages for breach of contract
The purpose of awarding damages for a breach of contract is to compensate the injured party for loss as opposed to punishing the wrongdoer. The fundamental principle is that damages should place the claimant in the same position as if the contract had been performed if this can be achieved by a financial settlement.
Damages for breach of contract can be considered to be compensatory, measuring the loss caused by the breach. When assessing damages, the process involves comparing the position the claimant is in, following the breach, and the position the claimant would have been in if no breach had occurred. Damages are sometimes referred to as “expectation damages”, because they seek to put the claimant in the position it expected. The net loss is calculated by quantifying all the harms caused by the breach and then deducting or crediting all the benefits caused by the breach.
You will be entitled to ‘liquidated damages’ if the contract specifies that an amount should be paid if the one side breaks the contract. These clauses are often found in manufacturing and building contracts, which often include penalty clauses for late completion of work.
There are two types of damages:
- Special damages – Awarded for quantifiable losses, such as loss of profits
- General damages – Awarded for unquantifiable losses, such as physical inconvenience and loss of amenity
An alternative option for breach of contract is ‘specific performance’, in which you can obtain a Court order for the other side to carry out their contractual obligations.
How to prove breach of contract
In order to be successful in a breach of contract claim, you will need to prove the following:
- You would need to prove that a legally binding contract was in place and that it had been breached.
- You would need to prove that the other party did not perform their part of the contract satisfactorily. The terms and conditions of the contract need to be clarified and compared to what actually took place.
- You would need to prove that you suffered a loss as a result of the breach.
You will also need to show that you have taken reasonable steps to mitigate your losses to reduce the impact of the breach of contract. The party in breach may argue that the innocent party has failed to mitigate their loss in order to reduce damages received.
Assessing the extent of damages
When evaluating the potential for damages, there are a number of key factors to consider:
- Did the breach cause an actual loss?
- If so, was the loss mitigated?
- When did the breach actually occur?
- Be realistic about any associated financial loss.
- Establish the cost of reinstating the position if no breach had occurred.
- Have goods been rejected?
- Have goods not been delivered?
- Are the goods defective?
- What are the associated costs of management having to deal with the breach.
How long do you have to bring a claim for breach of contract?
For breach of contract claims you generally have 6 years from the breach of contract to bring a claim. This means that you will need to have issued a Claim in Court (County Court or High Court) before the expiry of 6 years from the date of the breach of contract or cause of action.
How we can help
We have a proven track record of helping clients involved in commercial disputes. There can be an array of issues to take into consideration and we will guide you through all the necessary legal due diligence in a comprehensive and timely manner and support and advise you with all the negotiations. We firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.
How to Contact Our Commercial Litigation Solicitors
It is important for you to be well informed about the issues and possible implications of a contract dispute. However, expert legal support is crucial in terms of ensuring a positive outcome to your case.
To speak to our Commercial litigation solicitors today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
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