Breach of contract is a legal cause of action and a type of civil wrong, in which a binding agreement or bargained-for exchange is not honored by one or more parties to the contract by non-performance or interference with the other party’s performance. A breach occurs when a party to a contract fails to fulfill its obligation(s), whether partially or wholly, as described in the contract, or communicates an intent to fail the obligation or otherwise appears not to be able to perform its obligation under the contract. Where there is a breach of contract, the resulting damages have to be paid to the aggrieved party by the party breaching the contract.
If a contract is rescinded, parties are legally allowed to undo the work unless doing so would directly charge the other party at that exact time.
It is important to remember that contract law differs from country to country. Each country has its own independent, freestanding law of contract. Therefore, it makes sense to examine the laws of the country to which the contract is governed before deciding how the law of contract (of that country) applies to any particular contractual relationship.
What constitutes a breach of contract
There exist two elementary forms of breach of contract.
The first is actual failure to perform the contract as and when specified constitutes the first and most prominent type of breach. A contract lays down what must be done, what cannot be done, and when it must be done. If what was prescribed has not been done within the stipulated or reasonable period, there has been a breach of contract.
A further form of breach of contract is conduct indicating an unwillingness or inability to perform an obligation arising from that contract.
As noted by Seddon et al., these forms of breach of contract overlap, and an actual failure to perform may manifest an unwillingness or inability to perform. This is not always the case: an individual may fail to perform a contractual obligation even when willing or able.
These classifications describe only how a contract can be breached, not how serious the breach is. A judge will decide whether a contract was breached based on the claims of both parties.
The first type above is an actual breach of contract. The two other types are breaches as to the future performance of the contract and are technically known as renunciatory breaches. The defaulting party renunciates the contract in advance of when it is required to perform its obligations. The renunciatory breach is more commonly known as “anticipatory breach.”
Classifications of breaches of contract
The general law has three categories of breaches of contract, which measure the seriousness of the breach. In the absence of a contractual or statutory provision, any breach of contract is categorized as:
- Breach of warranty;
- Breach of condition; or
- Breach of an innominate term, otherwise known as an intermediate term.
There is no “internal rating system” within each of these categories (such as “a serious breach of warranty”). Any breach of contract is a breach of warranty, condition, or innominate term.
In terms of priority of classification of these terms, a contract term is an innominate term unless it is clear that it is intended to be a condition or a warranty.
