Breach of Contract

Breach of contract happens quite often. Two or more parties enter into a good faith arrangement and during their relationship, one or more decide(s) for whatever non-legally valid reason not to hold up their end of the bargain. A few types of breaches are minor, material, fundamental and anticipatory.

Minor breaches occur when an inconsequential portion of a contract is broken. If a minor breach occurs, parties affected may still be bound to perform as they agreed according to the contract, but may be entitled to damages inflicted by the breach. An example of a minor breach would be a landscaper and homeowner entering into a contract where the homeowner wants top-of-the-line sprinklers installed. The landscaper ignores the request and installs second-tier sprinklers, which work just about as good and have the same 10-year warranty as the other system. After discovering this, the homeowner sues the landscaper to recover the difference in cost between the two systems. The breach is non-material because, in essence, the two products are the same (made from the same materials, same warranty, same performance), but still a breach occurred, because the contract stipulated the use of a specific brand.

A material breach refers to cases where one party acts in such a way that might require the other party to incur costs in an effort to rectify the situation. Using the same example as before, instead of installing the almost identical system, the contractor installs rusty, used sprinkler lines under the guise that they are top-of-the-line sprinklers. The system does not perform at all like it should and all the grass dies. Appalled by this, the homeowner takes the contractor to court for the costs associated with having the junk system removed, new sod planted and a suitable sprinkler system installed.

The above example borders on a fundamental breach of contract. Fundamental breaches are so serious, they allow victimized parties to not only sue for damages incurred, but to escape from performance. Using the same example, if the curious homeowner observed the landscaper shoving rusty old pipes into the lawn, he may consider it a fundamental breach, refuse to pay and sue for damages.

Another form of breach is an anticipatory breach. This happens when it is inevitable that a party cannot perform as they have promised, even though the nonperformance has not yet occurred. The homeowner's bad day just got worse when he finds out that the landscaper he hired partied too hard last weekend and is in jail awaiting a bail hearing. Even though the job was set to start on Wednesday, the homeowner can safely assume the landscaper will not be able to hold up his end of the contract and may consider it a breach. The homeowner can terminate the contract and may consider taking the wayward contractor to court. Another example of anticipatory repudiation or breach occurs when the homeowner contracts with one landscaper to install the sprinkler system within a month. After two weeks of not hearing from the contractor, he pays his neighbor to install a system. Two days later, the landscaper shows up with all his supplies and workers only to find a system already installed. The landscaper may be able to sue the homeowner for breaching the contract because the homeowner made it impossible for him (the landscaper) to perform.

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