What Is a Breach of Contract?

A breach of contract is a violation of any of the agreed-upon terms and conditions of a binding contract. The breach could be anything from a late payment to a more serious violation such as the failure to deliver a promised asset.

A contract is binding and will hold weight if taken to court. To successfully claim a breach of contract, it is imperative to be able to prove that the breach occurred.

Understanding a Breach of Contract

A breach of contract is when one party breaks the terms of an agreement between two or more parties. This includes when an obligation that is stated in the contract is not completed on time—you are late with a rent payment, or when it is not fulfilled at all—a tenant vacates their apartment owing six-months' back rent.

Sometimes the process for dealing with a breach of contract is written in the original contract. For example, a contract may state that in the event of late payment, the offender must pay a $25 fee along with the missed payment. If the consequences for a specific violation are not included in the contract, then the parties involved may settle the situation among themselves, which could lead to a new contract, adjudication, or another type of resolution.

Key Takeaways

  • A breach of contract occurs when one party in a binding agreement fails to deliver according to the terms of the agreement.
  • A breach of contract can happen in both a written and an oral contract.
  • The parties involved in a breach of contract may resolve the issue among themselves, or in a court of law.
  • There are different types of contract breaches, including a minor or material breach and an actual or anticipatory breach.

Types of Contract Breaches

One may think of a contract breach as either minor or material. A "minor breach" happens when you don't receive an item or service by the due date. For example, you bring a suit to your tailor to be custom fit. The tailor promises (an oral contract) that he'll deliver the adjusted garment in time for your important presentation, but in fact, he delivers it a day later.

A "material breach" is when you receive something that is different from what was stated in the agreement. Say, for example, that your firm contracts with a vendor to deliver 200 copies of a bound manual for an auto industry conference. But when the boxes arrive at the conference site, they contain gardening brochures instead.

Further, a breach of contract generally falls under one of two categories: an "actual breach"—when one party refuses to fully perform the terms of the contract, or an "anticipatory breach"—when a party states in advance that they will not be delivering on the terms of the contract.

Legal Issues Concerning a Breach of Contract

A plaintiff—the person who brings a suit to court—who claims that there has been a breach of contract must first establish that a contract existed between the parties. The plaintiff also must demonstrate how the defendant—the one against whom a claim or charge is brought in a court—failed to meet the requirements of the contract.

Is the Contract Valid?

The simplest way to prove that a contract exists is to have a written document that is signed by both parties. It's also possible to enforce an oral contract, though certain types of agreements still would require a written contract to carry any legal weight. These kinds of contracts include the sale of goods for more than $500, the sale or transfer of land, and contracts that remain in effect for more than one year after the date on which the parties sign the agreement.

Courts will review the responsibilities of each party of the contract to determine whether they have fulfilled their obligations. Courts also will examine the contract to see if it contains any modifications that could have triggered the alleged breach. Typically, the plaintiff must notify a defendant that they are in breach of contract before advancing to legal proceedings.

Possible Reasons for the Breach

The court will assess whether or not there was a legal reason for the breach. The defendant might claim that the contract was fraudulent because the plaintiff either misrepresented or concealed material facts. The defendant might claim that the contract was signed under duress from the plaintiff, who applied threats or used physical attacks to compel the defendant to sign the agreement. Or there might have been errors made by both the plaintiff and the defendant that contributed to the breach.