When a party to a particular contract, either written or oral, fail to achieve the terms as per the contract, the party may be found to have breached the contract. Consequently, there are numerous ways in which a contract may be breached. Based on the studies by Alexandre common failures may include the failure to deliver services as well as goods, failure to pay on time, provision of inferior goods and failure to fully complete the job. Therefore, the breach of a contract may be defined as a promise broken to provide or do something. Further, to analyze the above topic and concept, we will consider the below definitions.
Breach of a Contract
Most of the common lawsuits around the globe are due to breach of contracts. According to Fischer (2015), the law usually offers various remedies for such breach. The remedies are usually designed to make the party injured whole. Therefore, the remedies ordered by the court are not designed to punish the other party that breached the contract but to restore the other injured party to a position they would have been if the other party had not breached the contract.
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The Partial Breach
Considering the literature by Goldberg (2016), the failure to provide or perform various non material provision as per the terms of the contract may enable the aggrieving party to seek a lawsuit against the other party for the damage. For instance, a homeowner can higher contractors to build a pond in his or her backyard. He or she can show the contractors the black liner required, and that should be incorporated under the sand. If the contractors instead install a different liner of similar design as well as a thickness that is hidden from the view. From this, the contractors did breach the terms of the above contract. Moreover, the homeowner cannot request the court to order the contractors to restart the pond construction using a black liner.
However, he can request the court to order the contractors to fully refund the differences in costs between the blue liner installed and the requested black liner. During such cases, the colour of the liner does not affect the functionality as well as the price was similar, the actual damage or the variance in price/value, therefore, is zero.
The Material Breach Of A Contract
The failure of another party to effectively perform their obligations as detailed in a contract in a manner that a contract value becomes destroyed may expose the party to liabilities for a breach of the contract damage. For instance in the above example, if the contractors did use a thin plastic liner that was not intended for rigors of maintaining the pond and enable it to last a longer period, the homeowner could recover the cost that could enable him or her to correct the material breach. The above breach could involve the removal of pond and replacement of the liner. This proves that material breach of a contract has the potential of relieving the aggrieved parties of their obligations under the contract. The breach also provides them the right to sue the other party for the damage. The breakdown of a material provision of the contract can, therefore, be defined to as repudiatory or fundamental breach.
The Anticipatory Breach of a Contract
This breach occurs when a party to a given party decides not to act in line with the terms agreed in the contract. The situation above usually leaves the second party to assume that they lack intention of accomplishing the agreements of the contract. In such cases, the party breaching can give such impressions by their actions such as failure to act. For example, failure to produce the ordered goods, refusing payments, or just by making it more obvious that they are unable to fulfill the contract terms. The anticipatory breach, therefore, enhances the non-breaching party to terminate the contract as well as sue the other party for the damage that results due to the breach of the contract before the other party breaches the contract in the subject matter.
Consider the example, Agnes, and Tom agrees to sell their typing machine to James. Both the parties agree on a purchase of 2000 USA dollars, and the sale should occur during September 2nd. On August 28th, James tells Agnes and Tom that he is unable to raise the money on time. From the above communication, Agnes and Tom can reasonably make assumptions that James is in anticipatory breach. This enhances Agnes and Tom to sell the typing machine to another party or rather file lawsuits against James for breaching the contract.
Specific Performance
In some cases, the aggrieving party cannot be fully compensated by awarding of the financial damage. In such cases, the party may request for special performance of contract terms. The specific performance can, therefore, be by the court-ordered actions. This may force the breaching party to provide or perform the requirements of a contract. The specific performance, therefore, is usually ordered in contracts which involve goods with values that are hard to determine. For instance, land and another rare item of personal properties.
The Remedy for the Breach of a Contract
When 2 or more parties make contract agreement, and another party breaches the contract, non-breaching party can be entitled to various remedies. First is the equitable remedy and the legal remedy. Each of these types of remedies has varying subtypes available.
Equitable Remedies
According to Paterson (2016), there are remedies which are imposed in situations where the money damage would not efficiently cure the non-breaching parties. The above remedy has various subtypes
Specific Performance
It is usually an order given by a court which requests the party breaching to perform all the conditions of a contract as originally written by both the parties. The above remedy is usually rare and is only ordered in varying situations. For instance, specific performance can be ordered when the case matter is considered unique. Situations like this may be involving specific pieces of property or just a famous painting. Moreover, courts are usually hesitant to order verdicts on specific performance remedies because it usually requires the ongoing monitoring of the contract by the courts.
Recession
This is a remedy which enables the non-breaching party a chance to cancel their responsibilities as highlighted by the contract breached. The above remedy is usually available when the contract was based on a mistake or even fraud by both parties or one party. Further, it can also be available when both the parties prefer cancellation of the contract and return the finance that had already been paid as part of a contract.
Reformation
The above remedy allows all the parties involved to modify the contract to reflect clearly what all the parties intend. It, therefore, requires the contract in the picture to be valid and genuine. It is usually available when any of the parties involved misunderstood the material part of a contract.
The Legal Remedies
These remedies usually take a form of financial damage which are given to assist in making the party innocent to be whole. There are various subtypes of legal remedy as analyzed below
The Compensatory Damage
It is the damage which is given to compensate a non-breaching party in cases where the contract breach. The above may include the consequential damage as well as the expectation damage. The expectation damage is the one that offers the non-breaching party funds that they were to receive in case the contract had been performed as agreed. The damage is therefore based on a contract or probably the market values of subject matters within a contract.
For instance, compensatory damage may include the total value/cost for a non-breaching party to buy substitutes for the products agreed on the contract. The substitute products should be equivalent to the ones that were initially contracted. Therefore, if the contract terms were for the sale of products, the compensatory damage will be; the difference between a contract price as well as the market price of the products.
Furthermore, the damage may sometimes consist of all the expenses that are necessarily required to make a non-breaching party whole again after a contract has been breached. The above may include the expenses incurred during the advertising of the products that a breaching party may have failed to pay for. Consequently, a non-breaching party has an obligation to mitigate their losses.
On the other hand, the consequential damage is the damage which reimburses a party that is innocent for the indirect values/costs which result from a breach. The above losses usually result from special circumstances involved in the contract. The circumstances are usually unpredictable. For example, the non-breaching party may request reimbursement for the losses of business profits which are derived from the lack of access to the required materials for the production of products required by the third parties.
However, for the innocent party to acquire all the damage above, they have an obligation to show proof that the losses they incurred are reasonably foreseeable to both parties when the contract was written. They also need to show that the resulting losses were because of the breach of the contract.
Liquidation Damage
In other contracts, the specific damage can be determined. The above damage is called liquidated damage. The damage is usually part of the contract where it will be hard to determine initial/actual amounts that a given party was damaged as a result of the contract breach. For instance, a contract breach which hinders a party to effectively compete.
Punitive Damage
Include the damage that is enacted to punish a party that is guilty to prevent the party as well as the others from engaging into similar conducts shortly. Consequently, the punitive damage requires stronger intents than is necessary especially in a standard breach of a contract claim. For a party to be awarded a punitive damage, the plaintiffs need to show that a breaching party did act in the fraudulently or maliciously. Various nations have prohibited plaintiffs from receiving the punitive damage on the breach of a contract claim.
Attorney Costs as Well as Fees
It is also clear that the prevailing party in a contract breach claim has the power to collect the cost as well as the attorney fees that they have incurred to bring about the legal actions. Different nations only allow the above damage if they are provided specifically by the contract.
Examples of cases Involving a Breach of Contracts
Courts around the globe are inundated with cases related to the breach of contracts. Cancelling or small, the court's decision in the cases tend to shape the manner in which business is done on a daily basis.
Revelations Perfume and Cosmetics Inc. v Prince Rogers Nelson
During the year 2008, the Revelations sued Prince; a flamboyant musician as well as his music label in the damage for allegedly reneging in the contract terms to assist the company market their product. The famous musician had signed a contract with the before to personally market the Revelation’s product which was titled after his album of the year 2006. Moreover, he also agreed that his likeness and name be used in the packaging of the perfumes. Consequently, the pop star declined to grant the interviews that were related to the above project. He also declined to provide pictures for the press release.
In the company's contract complaints, they requested the court to give over three million dollars in their profits that were lost and also to the punitive damage. Further, the judge found no incriminating evidence that Prince acted in malicious intent ( Andrews, 2016) . Prince was ordered to make payments approximating to four million dollars out of pocket expenses incurred by the company. The company's request for loss of profits damage as well as for punitive was therefore denied.
Macy's v Stewart Martha Living
The department stores owned by Macy's filed a complaint on a breach of a contract against the Martha Omnimedia for the making agreements with Penney J.C for the development of Martha Steward stores in their retail store during the beginning of the year 2013 ( Ashcroft, Ashcroft and Patterson, 2016) . Before the above deal, J.C. Penney had made a purchase on the majority stakes in Stewards Company for approximately thirty-nine million dollars. The above mini retail stores were to store Martha’s home products. Macy's however, argued that they signed a contract agreement during the year 2006, which granted them an exclusive right to sell as well as make various Martha Stewart products.
Consequently, Macy's requested the court to give preliminary injunctions that would stop steward from contract breaching as the court was still considering the matter. After twelve years of considering the case, the judge’s decision was that Penney had stepped on Macy's agreements/terms with Martha in their attempts to sell the goods bearing her name. Even though the contract signed by Penney was nullified, the financial breach of the contract damage was not decided immediately. This is because the parties may be limited to the costs and legal fee in relation to the lawsuit. Therefore, the judge made a decision and concluded that the case by Macy did not warrant any punitive damage.
Cancelling of Orders
Orders made on goods may be canceled if there is a delay in the delivery of the products ordered. Such cancellation usually constitutes a breach of a contract, and the vendor is entitled to compensation ( Mueller, 2014) . The conditions of the contract tend to specify the compensations that should be paid by the consumers for cancelling the order prior to delivery of the products. This is also applicable for the cancellation of a service during the period when the contract is still valid.
The compensations as detailed in the contracts should be reasonable as well as correspond to actual costs that are incurred by the vendors in this case. However, the calculation of the reasonable compensation level can be affected by the levels of personalization of the goods, the time the cancellations are made, actual costs incurred by the vendor, vendor's loss of income and extents to which the production of the products have progressed.
Summing up, the above analysis has analyzed and highlighted various situations when a contract can be breached and the consequences incurred after the breach of a contract. It is now clear that a contract should provide for calculations of the damage. Based on Goldberg (2014) analysis, it is important for a contract to include the common law remedies unless in cases it is a choice to exclude the remedies. Last but not least, it is important to read the contracts carefully and understand the terms and conditions before committing to it.
References
Ashcroft, J. D., Ashcroft, K., & Patterson, M. (2016). Cengage Advantage Books: Law for Business . Cengage Learning.
Alexandre, D. European Union Regulations concerning the breach and cancellation of contracts. China-EU Law Journal , 1-21.
Andrews, N. (2016). Remedies for Breach of Contract. In Arbitration and Contract Law (pp. 279-333). New York: Springer International Publishing.
Fischer, M. J. (2015). Remedies for anticipatory breach of contract (Doctoral dissertation, University of Cape Town).
Goldberg, V. P. (2016). Reckoning Contract Damage: Valuation of the Contract as an Asset. Columbia Law and Economics Working Paper , (530).
Goldberg, V. P. (2014). Future of Many Contracts. The. Duq. L. Rev. , 52 , (6) 323-331.
Mueller, K. (2014). International Contract Law-Website Incorporation into Contracts Requires Actual Notice under the CISG-Roser Technologies, Inc. v. Carl Schreiber GmbH, 81 UCC Rep. Serv. 2d 693 (WD Pa. 2013). Suffolk Transnat'l L. Rev. , 37 , (11) 489-493.
Paterson, J. (2016). Money Awards in Contract Law . New York: Willey.
