Even the best run and most reasonable of businesses will at some point almost certainly have to deal with a breach of contract claim. A core competence of our litigation solicitors is dealing with breach of contract.
The first and most important thing to consider if the other party is in breach is to establish the contract position and your options. The latter can often be more difficult.
It’s one thing being able to clearly show a breach of contract and another thing deciding what action to take and whether to ultimately pursue damages from the party in breach.
Breach of contract – is the contract clear?
It’s quite common for businesses to have contracts which they use daily where staff including senior staff don’t know what’s in the contract or what the terms actually mean. A well drafted contract will set out clearly each party’s obligations and what constitutes a material breach sufficient to terminate the contract.
It’s also important to remember that a written contract can be varied, sometimes without 1 of the parties realising. A contract might have been varied by communications such as email exchanges, verbal changes or by conduct.
A common error is to take action for a breach which doesn’t comply with the contract. In doing so, the innocent party could then also be in breach. Many contracts have a set process where an alleged breach occurs. This may involve serving a formal notice setting out the breach and demanding the other party puts rights the breach in a specified time. So, it’s always important to check.
Remedies for breach – damages or termination
Under English law principles not all breaches of contract give the innocent party the legal right to terminate. This is logical because if you think about contract clauses, some will obviously e vital, others of medium importance and some fairly minor in terms of importance. Only fundamental breach gives grounds for termination under general principles (the contract may specify what constitutes a fundamental breach or a termination breach).
The obvious examples of fundamental breach will be :-
- Complete failure to deliver goods or services agreed
- Failure by the buyer to pay for goods or services without proper cause
You will probably note that time is not necessarily a fundamental clause, although generally important. So, unless a contract makes very clear that timing of delivery is critical and failure to comply is a termination breach, it may not be.
If you do not have the right to terminate, you are left with 2 main remedies for breach of contract.
Damages for breach of contract
Claiming damages can be complex. Losses must be proven and the aggrieved party has a duty to mitigate loss. Economic losses and loss of profits are complex areas under English law. In summary, sitting back and doing nothing after another party has breached the contract, thinking that you can claim for everything is a very inadvisable course of action. So, if you have bought goods essential for your business but they are not delivered, you will probably need to give the party in breach an opportunity to pout things right and failing this, to find another supplier at best available cost. You would be taking a big risk just sourcing the goods from anyone at any cost, thinking the extra will be recoverable.
This is quite a rare remedy and is in the discretion of the court if requested. Specific performance is an order from the court compelling a party that has not delivered goods or services to do so.
Solicitor advice on breach of contract
If you need legal advice on a breach of contract, please do get in contact. We offer specialist and experienced advice on a wide range of contract types and also deal with international breach of contract issues and claims.