A contract is an agreement between two or more parties to do (or not to do) something. When one or more of the parties fails to perform as promised, without a legitimate, acceptable, and/or legal excuse, such failure to perform is called a “breach of contract.” If the breach is deemed “material” or significant to the performance of the agreement, then it can be grounds for termination. A breach can occur in several ways:
- A party fails to perform on time.
An example is when time is of the essence—where one party agrees to do something by a certain date—and doesn’t. If time is a material term, important to the carrying out of the agreement, then this breach can possibly be grounds for termination.
- A party refuses to perform at all.
An example is when one party decides, for some reason or no reason, that they don’t want to do what they agreed to do, then that cam possibly be a breach, subjecting the breaching party to liability.
- A party doesn’t perform in the manner they agreed to perform.
A breach can also occur if a party doesn’t fulfill its obligation to the other party, in the exact way they agreed to.
- A party prevents the other party from performing.
An example is when the breaching party interferes with the non-breaching party’s ability to carry out its end of the bargain, whether the breaching party’s actions are intentional, negligent, or reckless.
A contract may be breached in whole or in part, meaning that the contract has not been carried out in its entirety, or that only certain provisions of the contract have been carried out. Either way, this can possibly be grounds for termination. Once a breach of contract occurs, the non-breaching party has many options, which include terminating the contract, requesting that the breaching party do what it said it would do, or filing a lawsuit.
Depending on the situation, the non-breaching party can sue in a “court of law” for money damages, or “in equity”, compelling the breaching party to do what he/she agreed to do.
Tune in to the next post, where we’ll discuss breach of contract remedies. Until next time, think ASSET PROTECTION!