What Happens When a Contract is Broken?

A contract is a legally enforceable agreement between two or more parties.  So, how do you enforce it if it is broken by one of the parties?

That depends on how exactly the party breaches the contract.  A minor, or nonmaterial, breach of contract entitles the non-breaching party to actual damages suffered.  Therefore, if your mechanic used a different brand of oil that was of at least the same quality as that named in your contract, then you likely would not have a material breach of contract.  You did not suffer any damages and may have, in fact, received a better product.

If, however, a party significantly or materially breaches a contract then the other party is entitled to either force the breaching party to perform his or her responsibilities pursuant to the contract or to pay damages for the breach.  In the example of an auto mechanic adding oil to your car, if the mechanic failed to put any oil into the engine after cleaning it and your car broke down as a result of that mistake then you have suffered damages from the mechanic’s material breach of your contract and you are likely entitled to damages.

Here are some things to think about when deciding whether a party’s breach was material:

• The extent to which the breach has caused the nonbreaching party a denial of benefits under the contract which he or she reasonably relied upon;
• Whether the injured party can be compensated for the breach;
• The likelihood that the breaching party will correct his or her failure.  (When considering this likelihood it is important to consider all past performances by the party as well as any reasonable assurances the party has provided);
• How the breaching party’s behavior comports with fair business and good faith;
• Whether the breach was under the breaching party's control or whether the breach was due to outside influences. 

If a party materially breaches a contract then non-breaching party can consider the contract to be terminated. 

Ultimately, a material breach of contract is one that goes to the very core of the contract.  If you hire a videographer, for example, to take a video of your wedding and that videographer forgets his video camera and instead shows up with a point and shoot camera then the videographer has materially breached the contract.  You hired him to make a video of your wedding, an event that cannot be recreated, and he did not do that.  Since the videographer materially breached the contract you can consider the contract void and refuse to pay him. 

However, it is important to remember that a material breach is a legal term and if you have any doubts about whether a breach was in fact material then you should contact your attorney.  Otherwise, if the breach is not in fact a material breach then any failure to perform your own obligations pursuant to the contract could make you liable for damages!

For more information on broken contracts, contact a business law attorney today.

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