A contract breach occurs when a party to a contract fails to perform its contractual obligations in full or in part.
In this article, we’re going to discuss the four types of contract breaches and how to minimize the risk of future breaches.
Anticipatory breach
An anticipatory breach of contract is when one party to the contract indicates that they will not be able to perform their contractual obligations. This breach can be verbal or in writing.
If the anticipatory breach is verbal, it can be difficult to prove in court. It is best to have any anticipatory breaches in writing, preferably in the form of an email or letter.
Anticipatory breaches can be a huge waste of time and resources for the individual and the organization involved. However, that doesn’t mean there aren’t ways to minimize the risk. One way to minimize the risk of an anticipatory breach is to include a “force Majeure” or “Act of God” clause in your contract. This clause typically excuses a party from performing their contractual obligations if something beyond their control happens, such as a natural disaster.
Another way to minimize the risk of an anticipatory breach is to include a “liquidated damages” clause in your contract. This clause establishes a set amount of money that will be paid if a breach occurs.
Actual breach
An actual breach of contract is when one party to the contract fails to perform its contractual obligations in whole or in part. This type of breach can be material or immaterial.
A material breach is a failure to perform a contractual obligation that is so significant that it goes to the heart of the contract. This type of breach usually results in one party being substantially deprived of what they were expecting to receive under the contract.
There are a few different ways to remedy an actual breach of contract. One way is to “rescind” the contract, which cancels the contract and releases both parties from their obligations. Another way to remedy an actual breach is to “reform” the contract, which means the contract is modified to account for the breach.
Minor breach
A minor breach of contract is a failure to perform a contractual obligation that is not material and does not go to the heart of the contract. This type of breach usually does not result in one party being deprived of what they were expecting to receive under the contract.
There are a few different ways to remedy a minor breach of contract. One way is to “ignore” the breach and continue to perform under the contract. Another way to remedy a minor breach is to “renegotiate” the contract, which means the parties to the contract renegotiate the terms of the contract to account for the breach.
Material breach
A material breach of contract is a failure to perform a contractual obligation that is so significant that it goes to the heart of the contract. This type of breach usually results in one party being deprived of what they were expecting to receive under the contract.
There are a few different ways to remedy a material breach of contract. One way is to “rescind” the contract, which cancels the contract and releases both parties from their obligations. Another way to remedy a material breach is to “reform” the contract, which means the contract is modified to account for the breach.
Another way to remedy a material breach is to “sue” the party that committed the breach. This means the party that was breached can file a lawsuit against the party that breached the contract.
Ensure your contracts are easily accessible
Organizations should ensure that their contracts are easily accessible to the individuals who are responsible for performing under the contract. This can be accomplished by storing contracts in a central repository, such as a contract management system.
Individuals should also ensure that they have a copy of the contract before they begin performing under the contract. They should also keep a copy of the contract throughout the duration of the contract.
