Contracts are central to business dealings since they outline the terms of specific transactions. When both parties follow the terms of the contract, there aren’t any issues. If one party fails to follow their part of the agreement, that’s considered a breach of contract.
Not all breach of contract cases are the same, so you have to think about the specifics of your situation before you decide how to address it. The type of breach that occurs can impact the legal consequences the party who broke the contract will face — and the results of your own legal actions.
What are the types of contract breaches?
The circumstances surrounding what happened to cause the breach will determine what type of breach occurred. A breach of contract can be a:
- Material breach: This occurs when a breach makes a major difference to your goals. For example, a vendor delivers tablecloths with your logo instead of seat covers with your logo instead — or they send seat covers with another company’s logo.
- Minor breach: A minor breach occurs when it doesn’t seriously affect your operations or the terms of the contract. For example, not getting a shipment of holiday merchandise until four in the afternoon instead of by noon (as promised) — albeit still several days before your planned sale — is a minor breach.
- Anticipatory breach: This happens if one party knows ahead of time that they won’t be able to meet the terms of a contract and informs the other party. For example, this could happen if your contractor tells you they know they can’t finish building on time because the supplies are delayed.
- Actual breach: This means that one party simply refuses to comply with their end of the contract. For example, maybe your contractor just decides to bail on the job halfway through because of personal issues.
If you’re dealing with a contract breach, your first step should be to review the contract. The more your clearly understand your rights and remedies, the more decisively you can act.