What is a Breach of Contract?

Cesar Montalvo Civil Law

A business contract creates certain obligations that are to be fulfilled by the parties who entered into the agreement. Legally, one party’s failure to fulfill any of its contractual obligations is known as a “breach of contract”. Depending on the specifics, a breach can occur when a party fails to perform on time, does not perform in accordance with the terms of the agreement, or does not perform at all. Accordingly, a breach of contract will usually be categorized as either “material” or “immaterial” for purposes of determining the appropriate legal solution or “remedy” for the breach.

What happens after a contract is breached?

When a breach of contract occurs, or is alleged, one or both of the parties may wish to have the contract enforced on its terms, or may try to recover for any financial harm caused by the alleged breach.

If a dispute over a contract arises and informal attempts at resolution fail, the most common next step is a lawsuit. If the amount at issue is below a certain dollar figure, usually $3,000 to $7,500 depending on the state, the parties may be able to resolve the issue in small claims court. 

Courts and formal lawsuits are not the only option for people and businesses involved in contract disputes. The parties can agree to have a mediator review a contract dispute, or may agree to binding arbitration of a contract dispute. These out-of-court options are two methods of “alternative dispute resolution.”

Remedies for a Breach of Contract

When an individual or business breaches a contract, the other party to the agreement is entitled to relief (or a “remedy”) under the law. The main remedies for a breach of contract are: Damages, Specific Performance, or Cancellation and Restitution.

Learn more about how The Law Offices of Cesar A. Montalvo can help you with creating contracts and resolving contract issues for your business.