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Protect Your Business: Understanding the Four Types of Breach of Contract

Understanding the Four Types of Breach of Contract

In order to protect your business, you need to know when a contract has been broken. Learn the four types of breach of contract that exist.

There are very few more infuriating and dangerous moments in business than when a breach of contract occurs. Even if a contract breach is not fatal to a business in any way, it can be a stressful and annoying time.

This gets worse if you do not understand the different types of breach of contract. Different types of breaches will require different responses. Below you’ll find our guide that will give you a better understanding of the types of breach of contract.

Understanding The Four Types of Breach of Contract

A breach in contract is when one group that was bound by the contract has violated a rule in the contract. There are many details in a contract, and all parties involved need to understand them. 

When the contract helped establish a major business partnership or kept your trade secrets as secrets, then this can be a very scary time for a business. There are four types of breach of contract, and all of them can be painful.

1. Minor Breach

A minor breach is when the only recourse of a breach in the contract is to pay out possible damages. In this case, the breaching party must pay whatever they may owe to the non-breaching party. 

This breach often comes when a good or service provided by the breaching party is not what the contract specified. The non-breaching party may then ask for damages incurred.

If the value between the given good or service and the requested good or service is none, then no damages incurred may need payment. 

2. Material Breach

A material breach of contract is for when a good or service in the contract does not perform to the contract’s specification. This may allow the non-breaching party to demand damages incurred.

This is for damaged goods or faulty products that do not perform as advertised. This is common for construction contracts in relation to building quality. 

3. Fundamental Breach

A fundamental breach of control takes the material breach one step further. When one party breaches some manner of the contract, the non-breaching party can sue for any and all damages incurred and choose to terminate the contract.

This can be common in drastic breach of contract, often with complete failure to do the contracted duties. This will often require massive negligence on behalf of the breaching party. 

4. Anticipatory Breach

An anticipatory breach of contract is a complicated manner. This breach of contract is for an anticipated breach of contract and will require proof and reasoning from the non-breaching party. 

As you settle an anticipatory breach of contract, the non-breaching party may terminate the contract and sue for damages. This may require some calculation of future costs and damages. 

How Do You Respond?

If you are ever in question as to the nature and credibility of a breach of contract, contact your legal professionals as soon as possible. Ensuring you have done the proper legal procedures for filing a breach of contract can save you a lot of time, money, and damage. 

When a breach of contract is settled, damages are often paid out in cash. There are some rare occasions when a court may require the breaching party to fix their damages or to provide a service as part or instead of the payment. 

Better Business With Better Law

With a better understanding of the types of breach of contract, you can take the steps you need to make your business stronger and more secure. When you are ready to take the big steps towards ensuring your company’s contracts are secure, we here at McFarlin LLP are here to help. For a free consultation, contact our offices today