Breach of Contract
Reviewed by Aug 27, 2020| Updated on
A breach of contract refers to the failure to fulfil the terms of a contract. It refers to non-compliance with the terms of a contract by either or both the contracting parties. A contract is binding on both the parties. In case of non-compliance, either party has a right to sue the other for breach of contract.
Understanding Breach of Contract
A contract involves mutual obligations and rights between parties who have entered into such a contract. A contract is binding on the parties to a contract. The binding nature ensures that the parties should fulfil their obligations as per the contract and comply with the terms of the contract. A failure, by either of the parties or both, to fulfil the terms of the contract results in a breach of contract.
Examples of a breach of contract include: (a) A contract to perform in a classical music festival is breached if the performing artist does not come to the venue on the day of the performance. (b) A agrees to buy 100 coconuts from B on a particular date. The contract is breached if A refuses to buy the coconuts on the agreed date.
The parties to a contract may provide for the remedy for breach of contract while making the contract. For example, a contract for the sale of goods and payment terms of one month may provide for interest payment of 2% p.m. for a delay in payment.
Similarly, a contract for specific performance, such as dance performance in a stage show, may provide for compensation in case of failure to meet the terms of the contract.
A non-compliance with the terms of a contract leads to breach of a contract. Upon a breach of the contract, the parties may withdraw from the contract or enter into a new contract or alter the terms of the contract. The parties can also appoint an arbitrator for settlement of the contract. A clause for arbitration can be included in terms of the contract.
The types of breach of contract are: (a) The material breach alters the essence or substance of the contract. (b) The minor breach is not critical to the performance of the contract. (c) Anticipatory breach when one of the parties states in advance that they will not perform their share of the contract.
In case of a breach of contract, the affected party can approach the court for securing performance of the contract or seeking compensation for breach of contract. The court will review the terms of the contract, the performance by either party under the contract, the non-performance and surrounding circumstances.
Also, whether the party has sent a notice for breach of contract to the party breaking the terms of the contract. The court will then order the remedy for the breach of the contract.