A contract is an agreement where at least two individuals or entities who have a mutual obligation against each other pledge to undertake their expected responsibility. Once it is signed by the parties, the anticipation is that it will be fulfilled as stipulated.
Breach of contract occurs when a party to a contract does not perform the contract as agreed. It can be shown by the following ways:
- Repudiation: When a party to a contract expressly or impliedly refuses to honor it
- Part performance: When a party completes only a portion of their responsibilities under the contract
- Perfect tender rule violation: When a party doesn’t adhere to the contractual requirements while undertaking their obligations
Resolution of the breach
If a breach occurs, the parties should seek a resolution. If the contract contains an arbitration clause, the parties are obligated to arbitrate their dispute. If not, litigation may be necessary if the parties are unable to resolve the dispute themselves.
If you are sued for breach of contract, possible defenses may include:
- Frustration: There are times when a breach is beyond the control of the parties. For frustration to be actionable, all elements of the contract must be diminished or incapable of performance. For example, if the government has issued a lockdown, then even if one had intended to fulfill the contract, they may not be in a position to do so.
- Mistake: Parties may enter into a contract unwittingly believing that they can perform the obligations of the contract. Mistakes regarding rights and duties under the contract can lead to a breach. When it can be proved that there was a mutual mistake by the parties involved, the breach may be discharged.
Contracts involve much more than signing on the dotted line. If your business is accused of breaching a contract, or you believe the other party is in breach, learn about your rights and responsibilities before forging ahead with litigation.