A breach of contract is the failure by one party to perform their part of the contract.
In order claim for a breach of contract, the first stage is to establish whether a contract has indeed been formed.
A contract is made up of four elements:
- Offer (what are the terms of the offer)
- Acceptance (agreement to the offer terms by the parties)
- Consideration (usually a financial payment or offer of a service)
- Intention to create a legal relationship (in a business to business contract, this is assumed)
Verbal contracts can be legally binding, although the terms of the offer and the acceptance of those terms is more difficult to prove if they are not in writing. We therefore suggest that a contract is always drawn up where possible.
To help identify a breach, let’s look at Billy and Barry:
Billy and Barry enter a contract. Billy agrees to fix Barry’s Car. Barry agrees to pay Billy for the service, but later refuses. Billy can apply to the court for a claim under breach of contract.
Some defences may be available to Barry. For example, if the contract was varied and it was later agreed that Billy would do the job for free, yet raised a bill for the full amount after this variation. This may be enough (if proven!) to vary the contract, meaning the claim for non-payment may be unsuccessful.
Barry may even have a claim of his own against Billy, known as a counterclaim. He could claim that the work performed by Billy was of a low standard and caused further problems to the car, hence his refusal to pay.
So, if you feel that there has been a breach of contract what can be done?
It is always best to open the lines of communication with the other party to the contract. It may resolve the issue if informal discussions take place to try and resolve the breach. If informal discussions do not resolve the matter legal proceedings can be started. The legal remedies for breach of contract are:
- Damages: Damages are normally a financial remedy awarded to the party who has suffered the breach of contract, to place them in a position as if the contract been performed. In our example, damages may equate to the amount that Barry owed Billy;
- Specific performance: The Court can compel the party who is in breach to perform its obligations. In our example, if Barry had paid money to Billy in advance, yet Barry refused to perform the service. This remedy would force Barry to perform the service he promised under the contract.
- Injunctions: This is a legal way of stopping a party to act in a way which is prohibited by the contract. In our example, if Billy refused to fix Barry’s car as he had an offer for a bigger, better paid job, the Court can stop Billy from taking that new job until he fixes Barry’s car.
Litigation can become very expensive and therefore it is best to try and resolve the matter without the need to involve the Courts.