Breach of contract? |
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Part of the common law series
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| Contract theory |
| Classical theory · Promise theory |
| Consent theory |
| Contract formation |
| Offer and acceptance · Mailbox rule |
| Mirror image rule · Invitation to treat |
| Consideration |
| Defenses against formation |
| Lack of capacity to contract |
| Duress · Undue influence |
| Illusory promise · Statute of frauds |
| Non est factum |
| Contract interpretation |
| Parol evidence rule |
| Integration clause |
| Excuses for non-performance |
| Mistake · Misrepresentation |
| Frustration of purpose · Impossibility |
| Illegality · Unconscionability |
| Accord and satisfaction |
| Rights of third parties |
| Assignment · Delegation |
| Novation · Third party beneficiary |
| Breach of contract |
| Anticipatory repudiation · Cover |
| Exclusion clause |
| Fundamental breach |
| Remedies |
| Liquidated damages · Penal damages |
| Specific performance · Rescission |
| Other areas of the common law |
| Tort law · Property law |
| Wills and trusts |
| Criminal law · Evidence |
| view / this template |
Breach of contract is a legal concept in which a binding agreement or bargained-for exchange is not honored by one of the parties to the contract by non-performance or interference with the other party's performance.
A breach may be a minor one (also called a partial breach or an immaterial breach), in which case the non-breaching party will not be entitled to an order for performance of its obligations, but only to collect the actual amount of their damages. For example, suppose a homeowner hires a contractor to install new plumbing, and insists that the pipes (which will ultimately be sealed behind the walls) must be red. The contractor instead uses blue pipes that function just as well. Although the contractor breached the literal terms of the contract, the homeowner can only recover the amount of his damages - nothing.
A material breach is any failure to perform that permits the other party to the contract to either compel performance, or collect damages because of the breach. If the contractor in the above example had been instructed to use copper pipes, and instead used iron pipes which would not last as long as the copper pipes would have, the homeowner can recover the cost of actually correcting the breach - taking out the iron pipes and replacing them with copper pipes. A repudiatory breach (or fundamental breach) is a breach so fundamental that it permits the aggrieved party to terminate performance of the contract, in addition to entitling that party to sue for damages.
An anticipatory breach is an unequivocal indication that the party will not perform when performance is due, or a situation in which future non-performance is inevitable. An anticipatory breach gives the non-breaching party the option to treat such a breach as immediate, and, if repudiatory, to terminate the contract and sue for damages (without waiting for the breach to actually take place).