Breach of Contract in the Business World|
Table of Contents
II.Breach of Contract1
III.Immaterial Breach of Contract1
IV.Material Breach of Contract2
VI.Remedies at Law3
VII.Remedies in Equity5
This paper discusses the legal concept of a breach of contract and the options a business has in pursuing a breach of contract case. It defines what constitutes a breach of contract, how a party may breach a contract, and it compares the legal distinction between an immaterial and material breach of contract. This paper concludes with a description of what remedies are available to the non-breaching party when a contract has been breached. It describes the types of remedies at law (monetary damages) and remedies in equity that may be awarded in a breach of contract case.
Contracts form the very foundation of every legal business endeavor. They can dictate how a business is formed, the terms and conditions of employment, or a sales agreement between a business and its customer. In a perfect world, both parties would benefit from a contract and no disputes would arise. In the real business world, delays occur, financial problems happen, and unexpected events may prevent a contract from being fulfilled. It is imperative that a business understands what constitutes a breach of contract, how a party may breach a contract, and what legal remedies are available to recover any damages that may be incurred. Breach of Contract
A breach of contract occurs when one party fails to perform any term of a contract, written or oral, without a legitimate legal excuse (Hill, Breach of Contract). A businesses’ course of legal action against a breach of contract will depend on what type of breach has occurred, whether the breach is material (substantial) or immaterial (minor), and what damages have been incurred. Immaterial Breach of Contract
An immaterial breach of contract does not substantially impair the value of an entire contract. An immaterial breach allows the non-breaching party to sue for the actual damages it sustains, but it does not excuse the injured party from its contractual obligations (Gifis, 2010). In the contract case of Jacob & Youngs v. Kent, the court dealt with the matter of an immaterial breach of contract (Jacob & Young v. Kent, 1921). In the case, the plaintiff sued the defendant for not paying for the installation of pipes in his home. The defendant refused to pay because the defendant learned that some of the pipes installed in his home were of the brand name Cohoes, instead of Reading. The defendant argued that the plaintiff should replace all of the piping with the brand agreed upon in the contract before having to pay the plaintiff. The plaintiff refused and asked that the final payment be made. The court found that the breach of contract by the plaintiff was immaterial because the pipes that were installed were the same type and quality to which the parties had originally agreed. The only difference between the two pipes was the brand name. The defendant was ordered to remit the final payment to the plaintiff and received no damages because the actual difference of value between the two brands of piping was zero. Material Breach of Contract
A material breach of contract discharges the non-breaching party from further performance under the contract and entitles the injured party to sue for damages or for performance of the contract (Jentz & Miller, 2007, p. 218). The Restatement (Second) of Contracts lists the following criteria to determine whether a specific failure constitutes a material breach: In determining whether a failure to render or to offer performance is material, the following circumstances are significant: (a) the extent to which the injured party will be deprived of the benefit...