Businesses are constantly making contracts. Without them, many businesses wouldn’t be able to last as long as they have today. However, even though written and verbal contracts are legally binding, many people breach them.
Businesses may experience four different kinds of contract breaches when working with another party. Here are the basics:
1. Minor breach
As the name implies, a minor breach occurs when there’s a minor issue when it comes time to fulfill the bargain. This could happen when a requested service or product was delivered but failed to include something insignificant. In other words, the breach may not significantly harm the contract agreement.
To better understand how a minor breach can occur, you can consider someone failing to deliver a shipment of bananas by the due date by a single day. As long as the bananas weren’t overripe and it didn’t drastically affect your sales, it’s not a huge problem.
2. Actual breach
In an actual breach, a party may have completely failed to fulfill the obligations outlined in a contract. Actual breaches may occur before a service or product is provided or before a due date is over and is announced by the breaching party. Using the example above, that would be like the bananas simply never arriving.
3. Anticipatory breach
A non-breaching party may realize that a contracted party won’t fulfill their end of an agreement, which is referred to as an anticipatory breach. Similarly to an actual breach, one party may clarify that a part of a service or product won’t be delivered by the due date. When an anticipatory breach happens, the non-breaching party may cancel their contract and/or sue for damages. For example, the banana vendor may tell you that they’re having supply chain issues and warn you that the shipment probably won’t arrive.
4. Material breach
A material breach occurs when the wrong product or service was provided, causing great harm to the non-breaching party. For example, if you need 100 bananas for your ice cream Sunday special for the weekend special at your restaurant and you get apples instead, that’s certainly going to ruin your plans.
If you believe your business is suffering from a breached contract, then you need to be aware of your legal rights. Find out more about your legal options if your business has experienced a problem with another party’s failure to meet their contractual obligations.