A contract is a legally binding agreement. Breach of contract can occur when a party to a contract does something that he has agreed not to do. A breach of contract can also occur when a person does not do something he has agreed to do. Such violations of an agreement are often subject to various types of legally enforceable consequences.
Contracts are put into place to protect the parties of an agreement. A contract generally outlines each party’s obligations. It is also common for prohibitions to be included in the terms of the agreement. Breaching a contract does not mean that a party has violated all terms of an agreement. Violating a single portion of an agreement can result in a breach of contract.
There are several types of breaches that can occur with regards to contracts. Some breaches are minor. A party who is a victim of a minor breach often does not have much recourse. This is because the violation may not have caused any substantial or measurable harm.
An example of a minor breach could occur if a shipping company agrees to uses foam packaging inside of boxes. An occasion may arise where foam packaging is unavailable and the shipping company uses bubble wrap. As long as the packages are delivered on time and the goods are intact, it is unlikely that any legal action can be taken. An exception would be if the opposing party has paid for the foam packaging materials at a higher rate.
In some instances there occurs a material breach of contract. A material breach generally allows legal action to be taken that may force the breaching party to act in a certain way. It may also result in the breaching party being liable for the payment of damages.
A good example of a material breach could occur when Company A hires a consultant to act on its behalf in servicing Client B. One of the terms of the contract between Company A and the consultant may be that the consultant may not directly engage in any business affairs with Client B. Although the consultant may complete all the duties required of her satisfactorily, she will be in breach of contract if she later accepts an offer to work with Client B directly. If Company A makes the discovery before the work is concluded, it may be possible to prevent completion of the work. If the work has been completed, Company A may be able to sue for amounts that it would have received if it had been party to the deal.
A fundamental breach of contract is one that is so major it can result in dissolution of the agreement. Damages may also be awarded in such cases. If a trucking company is hired to deliver salt to the Transportation Department during snow storms over a two-year period but does not deliver for the first two storms, a fundamental breach has occurred. The Transportation Department may be absolved of the obligation to accept future services and may be able to sue for damages caused by the prior missed deliveries.