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What constitutes a breach of contract?


Many people and businesses rely on contracts to commemorate agreements that both people and businesses live by and conduct themselves according to. Once there is a valid contract, parties to a contract may wonder what constitutes breach of contract and what happens when a contract has been breached?

In general, a breach of contract occurs when a party to a contract fails to perform a promise that constitutes all, or part, of the contract between the parties. A failure to perform can manifest in different ways. For a breach of contract to occur there must, of course, be a valid contract. Different responses to a breach of contract may be possible but if a breach of contract claim is brought before a court, the judge will determine if the breach is a material or minor breach.

For a breach to be considered material to the contract, the non-breaching party must receive a benefit that is substantially different from what is specified in the contract because of the party's failure to perform. Certain factors may be considered when determining if the claimed breach was material. The amount of benefit received by the non-breaching party; if the non-breaching party can be compensated for the breach in an adequate manner; the extent to which the breaching party has performed; improper behavior on the part of the breaching party; the likelihood breaching party will perform remaining contract obligations; and hardship to the breaching party may all be considered.

When a breach of the contract is material, the non-breaching party is not required, or any longer obligated, to perform and can pursue available remedies for the breach. On the other hand, if the breach is considered minor, the non-breaching party is still required to perform but can pursue recovery of damages for the breach. A variety of remedies may be available, depending on the unique circumstances of each situation.

When a contract relationship turns into a contract dispute, and a party has not received what was bargained for in the contract, different remedies may be available. Because of this, it is important to understand what constitutes breach of contract and what remedies may be available in each situation.

Source: University of New Mexico Judicial Education Center, "Breach of Contract," Accessed August 24, 2014

Source: University of New Mexico Judicial Education Center, "Breach of Contract," Accessed August 24, 2014

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