Breach of contract

Failure of a party (not having a legal excuse) to perform in accordance with a promise made. An Insurance Policy consists of legally enforceable promises made by the Insurance Company (Insurer) only. No such promises are made by the Insured. This is the reason why the insurance policy is a Unilateral Contract.

A violation of the terms of a legal agreement; Default. Breach of contract allows the nonbreaching party to rescind the contract, sue for damages, or sue for performance of the contract.
Example: Baker contracts with owner Brown to purchase a property. When the closing date arrives, Brown refuses to Convey title to the property. Brown's action is not supported by any special conditions in the sales contract and therefore constitutes a breach of contract. Baker may rescind the contract and recover his Deposit may sue Brown for any expenses and damages incurred, or may sue to force Brown to sell.

The failure, without legal excuse, to perform an obligation or duty in a contract.

A party's failure to perform some contracted-for or agreed-upon act, or his failure to comply with a duty imposed by law which is owed to another or to society. 682 F. 2d 883, 885.

anticipatory breach see anticipatory breach (of contract).

breach of duty a failure to perform a duty owed to another or to society; a failure to exercise that care which a reasonable man would exercise under similar circumstances. 56 A. 498, 500.

breach of promise failure to do what one promises, where he has promised it in order to induce action in another. The phrase is often used as a shorthand for "breach of the promise of marriage."

breach of the covenant of warranty a failure of the seller's guarantee of good title which occurs when the buyer [covenantee] is evicted by a person claiming under a paramount title; since it is a future covenant it is not breached until that eviction occurs; see Cribbet & Johnson, Principles of the Law of Property 244-45 (3rd ed. 1989).

breach of the peace an offense embracing "a great variety of conduct destroying or menacing public order and tranquility. It includes not only violent acts but acts and words likely to produce violence in others." 310 U. S. 296, 308. In its broadest sense the term refers to any criminal offense (or at least any indictable offense, 207 U.S. 425). Today the term is generally used to describe conduct which unreasonably threatens the public peace and which lacks a specific criminal label; by statute such conduct is often called "disorderly conduct" as the specific criminal offense. See, e.g., New York Penal Law §240.20. The term has been defined by state courts as "disturbances of the public peace violative of order and decency or decorum," 147 N.W. 2d 886, 892; "any violation of any law enacted to preserve peace and good order." 236 P. 57, 59. It "signifies disorderly, dangerous conduct disruptive of public peace." 261 A. 2d 731, 739. See also fighting words; slander.

breach of trust "violation by a trustee of a duty which equity lays upon him, whether willful and fraudulent, or done through negligence, or arising through mere oversight and forgetfulness." 150 P. 2d 604, 648.

breach of trust with fraudulent intent "a larceny after trust, which includes all of the elements of larceny except the unlawful taking in the beginning." 31 S.E. 2d 906, 907.

breach of warranty "infraction of an express or implied agreement as to the title, quality, content or condition of a thing sold or bailed." 151 N.W. 2d 477, 482. A warranty is a guarantee and is breached when the thing so guaranteed is deficient according to the terms of the warranty. See U.C.C. §2-312 et seq.

constructive breach this occurs when the party bound to perform does some act that disables him from performing under the contract or announces in advance of his time for performing that he has no intention to do so. This creates an anticipatory breach. 19 F. 2d 388, 389.

material breach in contract law a breach that is substantial and operates to excuse further performance by the aggrieved party. A material breach destroys the value of the contract and gives rise to an action for breach of contract.

partial breach a breach that gives rise to a claim for damages but that is so slight that it does not substantially impair the value of the contract to the injured party and thus does not give the injured party cause to abandon the whole contract. 11 Williston, Contracts 8-9 (4th ed. 1990). For instance, if a person contracts to buy a white yacht, and is delivered a yellow yacht, he might have to purchase the yacht and seek damages for the cost of painting the yacht white.

Failure to live up to the terms of a contract. The failure may provoke a lawsuit, in which an aggrieved party asks a court to award financial compensation for the loss brought about by the breach.

Failure to complete an agreed task. If a breach of contract can be proved the aggrieved person is entitled to compensation for loss incurred. Alternative penalties may be that the contract be completed or that other tasks be completed.

Contract law

Part of the common law series

Contract formation

Offer and acceptance · Mailbox rule Mirror image rule · Invitation to treat Firm offer · Consideration

Defenses against formation

Lack of capacity Duress · Undue influence Illusory promise · Statute of frauds Non est factum

Contract interpretation

Parol evidence rule Contract of adhesion Integration clause Contra proferentem

Excuses for non-performance

Mistake · Misrepresentation Frustration of purpose · Impossibility Impracticability · Illegality Unclean hands · Unconscionability Accord and satisfaction

Rights of third parties

Privity of contract Assignment · Delegation Novation · Third party beneficiary

Breach of contract

Anticipatory repudiation · Cover Exclusion clause · Efficient breach Fundamental breach

Remedies

Specific performance Liquidated damages Penal damages · Rescission

Quasi-contractual obligations

Promissory estoppel Quantum meruit

Related areas of law

Conflict of laws · Commercial law

Other common law areas

Tort law · Property law Wills, trusts and estates Criminal law · Evidence

v • d • e

Breach of contract is a legal concept in which a binding agreement or bargained-for exchange is not honored by one or more of the parties to the contract by non-performance or interference with the other party's performance.

Contents 1 Minor breaches 2 Material breach 3 Fundamental breach 4 Anticipatory breach 5 Limits on Remedies and Damages 6 See also

Minor breaches

A minor breach, a partial breach or an immaterial breach, occurs when the non-breaching party is unentitled to an order for performance of its obligations, but only to collect the actual amount of their damages. For example, suppose a homeowner hires a contractor to install new plumbing and insists that the pipes, which will ultimately be sealed behind the walls, 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 can only recover the amount of his damages. Generally, this means the difference in value between the red pipe and the blue pipe. Since the pipes are identical value, the difference is zero; therefore, there are no damages and the homeowner receives nothing. (See Jacob & Youngs v. Kent, on which this example is based.)

Material breach

A material breach 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 which would not last as long as the copper pipes would have, the homeowner can recover the cost of actually correcting the breach - taking out the iron pipes and replacing them with copper pipes.

The Restatement (Second) of Contracts lists the following criteria to determine whether a specific failure constitutes a breach:

In determining whether a failure to render or to offer performance is material, the following circumstances are significant: (a) the extent to which the injured party will be deprived of the benefit which he reasonably expected; (b) the extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived; (c) the extent to which the party failing to perform or to offer to perform will suffer forfeiture; (d) the likelihood that the party failing to perform or to offer to perform will cure his failure, taking account of all the circumstances including any reasonable assurances; (e) the extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing.

American Law Institute, Restatement (Second) of Contracts § 241 (1981)

Fundamental breach

A fundamental breach (or repudiatory breach) is a breach so fundamental that it permits the aggrieved party to terminate performance of the contract, in addition to entitling that party to sue for damages.

Anticipatory breach

A breach by anticipatory repudiation (or simply anticipatory breach) is an unequivocal indication that the party will not perform when performance is due, or a situation in which future non-performance is inevitable. An anticipatory breach gives the non-breaching party the option to treat such a breach as immediate, and, if repudiatory, to terminate the contract and sue for damages (without waiting for the breach to actually take place).

Limits on Remedies and Damages

Typically, the judicial remedy for breach of contract is monetary damages. See damages. Where the failure to perform cannot be adequately redressed by money damage, the court may enter an equity decree awarding an injunction or specific performance.

The aggrieved person has a duty to mitigate or reduce damages by reasonable means. Liquidated Damages may be limited to a specific amount. In the United States, punitive damages are generally not awarded for breach of contract but may be awarded for other causes of action in a lawsuit. Limitation of Liability (Exculpatory) clauses. [Private agreement is permissible.] [Invalid when public interest is involved and there is willful conduct or gross negligence.]

See also

• anticipatory repudiation
• contract
• fundamental breach
• lawsuit

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