Understanding Breach of Contract Law

Breach of Contract Definition

The term breach of contract is defined as an act of breaking the terms set out in a contract. A contract is a legally binding promise made between parties. In a contract, parties agree to provide a service or product, and/or to pay for such service or product. Therefore, a breach of contract occurs when one of the parties fails or refuses to uphold their promise.

A breach of contract may be a material breach (total breach) or a non-material breach (partial breach).

A material breach of contract occurs when the fundamental purpose of the contract cannot or was not fulfilled because the breach is so significant that the agreement is irreparably broken.

A partial breach of contract occurs when one party fails to fulfill a minor obligation.

Parties (plaintiffs) alleging breach of contract may have legal recourse and choose to pursue litigation. Conversely, the accused party (defendants) maintain the legal right to defend the claim.

Common defenses in breach of contract include fraud, duress, undue influence, or an expired statute of limitations.

Breach of Contract Examples

Examples of breach of contract include the failure of one party to provide the services it agreed to provide, the failure of one party to pay for goods or services, or when a company pulls out of an agreement, after the agreement has been made, but before the services or goods are provided.

A construction contractor, who was hired to remodel a bathroom yet fails to complete the job to the homeowner’s expectations, may be accused of breach of contract. A company which promises to purchase an agreed upon number of goods but fails to do so may be accused of a breach of contract. A company that hires a web designer but fails to pay them for their work may be accused of breach of contract. An eCommerce company selling items claiming to be “like-new” may be accused of breach of contract if the recipient receives a used or damaged product. If an agreement is made and, and one party withdraws from the agreement, or fails to provide payment or services as promised, a breach of contract may be alleged.

Breach of Contract Damages

Damages that may be available to plaintiffs who are successful in litigating breach of contract claims in California may include General Damages (also known as Consequential Damages) or Special Damages (also known as Incidental Damages). In addition, some contracts may have provisions for Liquidated Damages. The courts may also assign Damages known as Special Performance.

General Damages are those that directly result from the breach of contract. For example, in a real estate lease which is broken by a renter, General Damages would cover the lost rental income. Special Damages are those which result from the breach of contract because incurred expenses or additional losses were suffered by the plaintiff. Special Damages will only be awarded if the plaintiff can prove that the defendant was aware of them at the time the contract was executed.

Liquidated Damages will only be awarded if they are provided for in the contract and are often in the form of set penalty fees in the event of a breach of contract. Special Performance may be awarded by the court wherein the defendant is forced to perform their obligations under the contract.

Breach of Contract Lawsuit

A breach of contract lawsuit is litigation initiated by an aggrieved party, alleging that the defendant did not uphold their obligations, which were made in a legally binding agreement. Breach of contract lawsuits are typically only initiated after all other forms of resolving the problem have been exhausted. Prior to entering into litigation, plaintiffs typically pursue actions such as sending a demand letter or attempting to resolve the issue in mediation or arbitration.

Breach of contract lawsuits are very common and occur within virtually every industry. Breach of contract lawsuits are frequently filed in employment matters, construction matters, general business matters, partnership disputes, and real estate matters.

Breach of Contract Remedies

Remedies for breach of contract are available through the California court system, though many disputes may be resolved through mediation or arbitration. The courts may impose remedies ranging from General Damages, to ordering defendants to fulfill the terms of the contract, to Special Damages. In order to secure a remedy for after a contract has been breached, plaintiffs often hire an attorney to pursue litigation on their behalf.

Remedies may be pursued for either a material breach of contract (also known as a total breach of contract) or for a partial breach of contract (also known as a non-material breach of contract).

Breach of Contract California

A breach of contract in California occurs when one party to the contract fails to fulfill a legal duty that the contract created. A contract is a legal agreement between two parties that establishes obligations for both parties. Each person or company who enters into a contract has both the duty to fulfill contract requirements and a right to expect that the other party will fulfill their obligation.

A breach of contract in California may occur any time a major or a minor failure to perform occurs. Parties to a contract are bound to fulfill all of the requirements of the agreement, even if they did not read the contract. If a failure to perform occurs, the plaintiff has legal remedies to pursue through the court system.

Breach of Contract Statute of Limitations

In California, most written contracts have a four-year statute of limitations from the date of the alleged breach of contract. The statute of limitations for a breach of contract involving an oral agreement is two years from the date that the contract was broken. This is significant, as the statute of limitations does not begin when the contract is signed, but rather when the contract was breached.

Some contracts shorten the statute of limitations via a provision written into the contract. If such a provision is written into the contract, it must allow for enough time for either party to pursue legal remedies in the event of breach of contract.