Breach of contract is a phrase that many people have either heard of on television or in the news. Contracts are formed everyday whether you are filling up at the gas station or are making a multi-million dollar deal. Because so many people have heard of breach of contract, many people are willing to throw it around as a casual threat of legal action whenever they get mad at a business. However, not many people really understand what is a breach of contract. So, what is breach of contract? Breach of contract is a claim someone has against the other party of a contract who has not performed their duties under the contract. Essentially, someone has not lived up to their part of the deal. But first there must be a contract in which to breach.
Is There a Contract to Breach?
Before you can breach a contract, you must have a valid contract in which to breach. Let’s clear up one common misconception first. Most people know someone who has insisted that oral contracts are not enforceable. They are wrong! With some exceptions, oral contracts can be enforced. However, they may be harder to prove than a written contract.
Basically, a contract has four elements: (1) offer, (2) acceptance, (3) consideration, and (4) mutual assent. For more on the elements of a contract, click here. There are some exceptions to these elements like the Uniform Commercial Code, among others. But that is for a future blogpost.
Get to the Point Already!
Well as I stated above, a breach of contract is a claim against someone that has not performed their obligations under the contract. For example, if a business owner enters into a contract with a contractor to build the business owner’s new location. As a part of the contract, the business owner specifies that the contractor must use a certain type of high end copper pipe for the plumbing in the building, and that the building must conform to the plans of a commercial building. Now, the contractor builds a house instead of conforming to the plans in the contract. The contractor has breached the contract between contractor and the business owner. The business owner can now sue the contractor for breach of contract and seek damages. However, there are two types of breaches.
Material Breach vs. Non-Material Breach.
Now, there are two types of breaches. The first is called a material breach. The illustration above is perfect example of a material breach. A material breach, is a breach that goes to the heart of the contract. Above, the MN business owner’s goal was to have the contractor build a new location for his business, but the contractor built a house instead. The Minnesota contractor’s breach was material because the purpose of the contract was completely defeated. Because the breach was material, the business owner may be excused from performing her obligations under the contract.
Now if the contractor built the building to specifications, with the exception of the high end copper piping specified in the contract, the contractor still has breached the contract with the business owner. The contractor may have installed cheaper pipes for the plumbing, but they still work adequately. Therefore, the breach is non-material because it does not go to the heart of the contract. The business owner still has a usable building with working plumbing. The business owner may still sue for damages under breach of contract; however, the business owner must still perform her obligations under the contract.
What if Someone Breaches a Contract With Me?
It is important that a Maple Grove entrepreneur realize that even though they may feel that they have been cheated, breaching a contract is NOT a criminal offense. Call a knowledgeable business law attorney that specializes in breach of contract. An attorney can lay out your options to recover what you are owed. Moreover, many breaches of contract, can be prevented by having a knowledgeable attorney draft or review your contract. It is always cheaper to invest in having an attorney as soon as possible whether it is drafting or reviewing the contract or seeking counsel as soon as a concern about a breach of contract arises.