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Breach of contract

Explore the type of contract breaches and what should happen if it occurs 

What is considered a breach of contract?

A breach of contract is where one party breaks the terms and conditions that is set out within the agreed contract and is a risk for anyone that enters a legally binding contract. A breach of contract could be a late payment, failure to deliver certain products or refusing to fulfil the obligations set out in the contract. The first step is identifying that a breach has occurred. As contracts are legally binding agreements, it can be taken to court. However, it’s important that the party impacted by the breach of contract can prove that is has happened.

 

What should happen after a contract is breached?

A resolution should try to be achieved, but this can take long periods of time, sometimes years in more serious and complex disputes. When a breach of contract has occurred, there are five courses of action that could happen.

  • Adjudication: This is where a third-party adjudicator intervenes in the hope to provide a swift interim resolution.
  • Mediation: Mediation offers a solution for minor contract breaches. It involves a mediator who will work with all parties to reach a mutual outcome.
  • Conciliation: This involves a third party helping all parties resolve their dispute to come up with an agreed resolution.
  • Arbitration: An arbitration agreement is a written contract which parties agree to settle a dispute outside of a court.
  • Litigation: Litigation is the process or engaging in legal action in court to resolve a dispute.
 

Types of breach contract damages

Breaches of contracts vary, depending on the type of breach that has occurred. Take a look below at the type of contract breaches and how they are classified.

  • Minor breach of contract: A minor is breach is when you don’t receive an item or service by the due date. The party that suffered the breach can pursue legal action, particularly if it’s resulted in any financial losses.
  • Material breach of contract: A material breach is where one party receives a different result or significantly less compared to what was outlined in the contract. This could be a failure to perform contractual obligations or not meeting any obligations at all. If a material breach does occur, then you can pursue any demands related to breach, both direct and indirect consequences.
  • Actual breach of contract: An actual breach is when one party does not carry out the terms set out in the contract. This type of breach occurs if the breaching party refused to fulfil their obligations or have done so incompletely. If this type of breach occurs, then the party affected can receive compensation from economic losses and losses that got beyond the value of the contract.
  • Anticipatory breach of contract: An anticipatory breach is when one party says in advance, they are unable to deliver the certain terms laid out in the contract. However, the breaching party will still be liable to any damages that may occur.
 

CIPS Contract Management Cycle

Our Contract Management Cycle is used to create a smooth end-to-end process, ensuring optimum scoping, planning, managing, and reviewing are taken place at the right time. Find out more about the Contract Management Cycle

Contract management key themes

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