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September 29, 2017

4 Types of Contract Breaches

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A breach of contract is a type of civil wrong in which a binding agreement or bargained exchange is not honored by one or more of the parties to the contract. The breach occurs when a party fails to fulfill their obligation as described in the contract or communicates an intent to fail the obligation or otherwise appears not to be able to perform the obligation in the contract.

Material Breach

A breach of contract only constitutes a material breach if the terms breached in the contract are conditions. For a term to be a condition it must satisfy the test of essentiality, which requires that the term was of such importance to the promisee that the party would not have entered into the contract unless they had been assured of a fulfilled performance of the promise and this was apparent to the promisor.

Fundamental Breach

This is sometimes known as a repudiatory breach and is a breach so fundamental that it permits the distressed party to terminate performance of the contract, as well as entitling that party to sue for damages.

Anticipatory Breach

A definitive indication that the party will not perform their contracted obligation when due or a situation in which future non-performance is inevitable. An anticipatory breach gives the party who is owed service the option to treat this breach as immediate, and, if repudiatory, to terminate the contract and sue for damages.

Other Minor Breaches

In a partial breach or immaterial breach where there has been substantial performance, the non-breaching party cannot sue for specific performance, and can only sue for actual damages. In most cases, the party cannot sue for damages like if a contractor uses a plastic pipe instead of the aluminum one specified in the contract because it was less expensive. The homeowner might not have ever known as long as the pipe held up.

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