This article will discuss Breach of contract, including;
- What is a contract?
- When is a contract legally binding?
- What is a breach of contract? and
- How to remedy a breach of contract
What is a contract?
A contract is a promise or an agreement between two or more parties. A party is a person or a group of people that form one entity. Therefore, an agreement or a promise can be made between individuals, businesses or a combination of the two.
When is a contract legally binding?
A contract exists when an offer is made by a party which is accepted by another party. This offer and acceptance can be expressed in writing, orally or can be implied. An implied agreement exists without written or verbal communication being necessary. The implied contract is created from the actions, conduct, or circumstances of one or more parties in an agreement.
The three key elements to a contract
An agreement must consist of an offer and an acceptance of that offer. An offer is a statement of terms. The person making the offer will be contractually bound to the terms. The acceptance of the offer needs to be unconditional. If there are any negotiations, these will be treated as counter offers and will not be counted as an acceptance. The acceptance of the offer must be communicated unless the acceptance was intended by way of conduct. For example, purchasing a product. Within the agreement and consent to enter the contract, the party agreeing to the offer/promise must be able to do so freely. For example, there must not be any coercion, force, fraud, undue influence, or misrepresentation.
It must be clear that the intention of all the parties is to enter into a contractually and legally binding agreement. In business, there is a higher level of assumption that the parties had the intention of creating a legally binding contract. Whereas in contracts formed out of personal agreements between two individual parties, the assumption is far lower.
The contract has to be based on the exchange of “something”, that “something” is the consideration. Otherwise, this would be classed as a gift. The Consideration has to have some value in the eyes of the law.
What is a breach of contract?
A breach of contract occurs when one or more of the parties fails to perform their duties as stipulated within that contract. This can also be in the form of failing to abide by the ‘terms and conditions’ of a contract.
What are the damages for a breach of contract?
When assessing damages in cases of breach of contract, the intention is to place the injured party back to the position they would have been in, if the breach had not occurred. Alternatively one may seek an order of specific performance. An order of specific performance is when a party is ordered by the court to fulfil their duty as defined within the term or terms of the contract.
How to remedy a Breach of Contract
If you are looking to remedy a breach of contact it is very important to assess the merits of your case.
Existence of the contract
The first thing is to ensure that there is a contract in the first place by assessing the three key elements to the contract. If you have made a verbal contract with another this can be potentially difficult to establish.
Proof that the contract has been breached
Following this, you will then need to establish that the contract has been breached. You will need to be able to show in evidence what the other parties obligations were under the terms of the agreement. You will then need to show in evidence that those obligations were not performed either at all or to a satisfactory quality.
Proof that the breach of contract damaged the injured party
As the injured party, you must prove the amount of loss. You must also show the loss was as a result of the breach of contract or in other words reasonably foreseeable. Finally, you must be able to show the court that you have mitigated your losses. This means that you must limit the amount of damages where possible.
Quantifying your case can be a difficult task in itself and may require an expert to assess the level of damages. This cost will need to be considered when you evaluate the merits of taking your case further and whether the costs to pursue the case outweigh the losses to be recovered.
Are court proceedings the best way forward?
The next assessment is whether taking legal action will be detrimental to the relationship you have with the party in breach. If you have an ongoing relationship with a party who has breached a contract it may be best to seek further negotiations before commencing court proceedings.
Funding your case
There are many different ways in which your case can be funded and it is always useful to explore such methods with one of our experts.
The last and arguably the most crucial aspect is to assess whether the costs of court proceeding will outweigh the damages that can be recovered from the other party.
If you would like to enquire about a breach of contract issue with one of our litigation experts please see our civil litigation page. If you wish to enquire about an employment contract please go to our employment law page