Breach of Contract

Contracts are put in place to ensure that named parties perform their duties outlined in the contract. In a perfect world, both parties would perform their part of the bargain, both parties would be pleased, and no disputes would arise. However, we don’t live in a perfect world, and many problems can arise when entering into a contract. A breach of contract is an example of one such problem.  We will explain exactly what a breach of contract is, the types of breaches, and how to properly handle these types of situations.

What is Breach of Contract?

A breach of contract occurs when one party fails to fulfill or honor any of its obligations, without legal excuse, as set forth by the contract. It depends on the specifics of the contract, but these can include failing to perform on time, not performing in accordance with the terms of the agreement, or not performing at all.

Types of Breaches

There are different types of breaches, depending on the nature of the contract, and this determines how the breach is legally handled or remedied. The following are a couple of the different types of breaches that can occur:

Material

A material breach, or total breach, is when a party fails to complete a major part of the contract, and is substantial enough that it prevents the contract from being completed or defeats the entire purpose of the contract. The condition that was not completed, was the entire reason for the contract in the first place. A material breach implies that the innocent party, or the party that did not breach the contract, is not obligated to perform or complete their end of the contract. It also implies that the innocent party can compel performance or collect damages from the breaching party.

If there is just a partial breach and a party has substantially performed the contract, the nonbreaching party is likely limited to collecting actual damages.  An example of this is if a contractor used a different color pipe or a different type of material, but it works and operates the same as what was expected.

Anticipatory Breach

An anticipatory breach occurs when a party announces, in advance of the due date, that they will not be fulfilling their end of the contract. The non-breaching party can terminate the contract and can sue for damages incurred, if applicable.

Remedies for Breach of Contract

Depending on the type of breach, there are many ways to remedy a breach of contract. These include money damages, performance, restitution, rescission, or reformation. If informal attempts at resolving the issue do not work, the next common step is a civil lawsuit. The parties may also agree to use a mediator to review the dispute or may agree to binding arbitration. In Colorado, the law limits the time that a party can bring a lawsuit for breach of contract, with some exceptions, to three years. It is also a lot easier to prove breach of contract when the contract is written, and not just a verbal agreement.

Every breach of contract is different. If you think you are a victim of a breach of contract, contact us today and we would be happy to review your contract.