BREACH OF CONTRACT

Situations for Filing a Claim for Breach of Contract in Small Claims Court

All of us are, have been or will be bind with different types of contracts: we have to sign a contract to get our credit card; to lease a car; to rent an apartment; to advertise our product or service; to go to gym; to get a job; to buy a computer; to hire a construction team; to … Everywhere. Every time. Often, we don’t even realize that fact.

There are an endless number of situations when things go wrong: a fridge we bought yesterday doesn’t work; a printing company issued only 5,000 copies of our corporate brochure instead of 10,000 and insists on the number of 10,000; a web designer of our e-store is 5 months behind the schedule. We are frustrated and tired of it and looking for legal help.

Laws exist for the protection of the consumer regardless of whether they are buying goods in a store, obtaining services from a company, or applying for a credit card. All agreements are strictly regulated and there are consequences should these regulations be broken.

Unfortunately, sometimes dishonest people will slip out. For instance, a large retailer that advertises goods on the Internet is inviting the consumer to enter into an agreement to make a purchase. However, the products on websites have been incorrectly priced and the purchase has taken place before the mistake has been noticed. If this happens then there is nothing could be done.

Breach of Contract Explanations

Contract

A contract is an exchange of promises between two or more parties to do, or refrain from doing, an act, which resulting contract is enforceable in a court of law. A contract is a promise or set of promises, the breach of which gives a remedy or the performance of which creates a legally recognized obligation. The remedy at law for breach of contract is “damages” or monetary compensation. The remedies award the damaged party the “benefit of the bargain” or expectation damages.

Any oral or written agreement between two or more parties can constitute a binding legal contract. However, only a written contract can be material evidence. If the contract is only oral in nature, it might be difficult to prove the existence of the contract in Small Claims Court.

There are some types of contracts that must be in writing to be enforceable, such as:

  • Sales of real property
  • Promises to pay someone else’s debt
  • A contract that takes longer than one year to complete
  • Property leases for more than one year
  • A contract that will go beyond the lifetime of the one performing the contract
  • The transfer of property upon the death of the party performing the contract

If you don’t have such a contract in writing, the breach of contract will not be enforceable.

Breach of Contract Definition

Breach of contract is a failure of a party to a contract to perform their obligations as agreed to within the contract. Breach of contract is a legal cause of action in which a binding agreement or bargained-for exchange is not honoured by one or more of the parties to the contract by non-performance or interference with the other party’s performance. If the party does not fulfill their contractual promise, or has given information to the other party that they will not perform their duty as mentioned in the contract, there is the “breach of contract” case.

Types of Breach of Contract

A contract may be breached in whole or in part. A breach of contract usually occurs when one or more of the parties:

  • fail to perform as promised;
  • make it impossible for the other party to perform;
  • make it known there is an intention not to perform.

The main types of breach of contract are:

  • Minor
  • Major
  • Material
  • Fundamental
  • Anticipatory

Minor (also, partial or immaterial) Breach of Contract: In a “minor” breach, the non-breaching party cannot sue for specific performance, and can only sue for actual damages. Minor breaches can be, for example, a builder who substitutes his own type of materials for specified materials. The substituted materials may work just as well as the specified but it can still be seen as a minor breach of contract. Suppose a homeowner hires a contractor to install new plumbing and insists that the pipes, which will ultimately be hidden behind the walls, must be red. The contractor instead uses blue pipes that function just as well. Although the contractor breached the literal terms of the contract, the homeowner cannot ask a court to order the contractor to replace the blue pipes with red pipes. The homeowner can only recover the amount of their actual damages. In this instance, this is the difference in value between red pipe and blue pipe. Since the color of a pipe does not affect its function, the difference in value is zero.

Major Breach of Contract: If something particular had been specified in the contract as a condition, a breach of that condition would constitute a “major” breach. For example, when a contract specifies time is of the essence and one party to the contract fails to meet a contractual obligation in a timely fashion, the other party could sue for damages for a major breach.

Material Breach of Contract: A material breach is a breach of contract that has serious consequences on the outcome of the contract. A material breach of contract is any failure to perform that permits the other party to the contract to either compel performance, or collect damages because of the breach. If the contractor in the above example had been instructed to use copper pipes, and instead used iron pipes that would not last as long as the copper pipes would have lasted, the homeowner can recover the cost of actually correcting the breach – taking out the iron pipes and replacing them with copper pipes.

Fundamental Breach of Contract: A fundamental breach of contract is a breach so serious that the contract has to be terminated. In addition that party is entitled to sue for damages.

Anticipatory Breach of Contract: An anticipatory breach of contract is one where one of the parties makes it known that they will not be carrying out agreed work, and the consequences can be termination of the contract and damages being sought in court. An anticipatory breach gives the non-breaching party the option to treat such a breach as immediate and terminate the contract and sue for damages (without waiting for the breach to actually take place).

Overview of Remedies for Breach of Contract

The law provides remedies against those who breach their contracts. The most common and usual remedy for breach of contract will be an award of damages. The general rule for recoverable loss in breach of contract cases is that the courts will award damages to place the aggrieved parties in the same position they would have been in had the contract been performed. In some contracts, the parties may choose to specify a liquidated sum of damages in the event of breach. The caveat here is that the specification of liquidated damages cannot be a penalty. If the liquidated damage clause is enforceable, it will avoid the need for the aggrieved party to prove their actual damages.

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