Orange County Business Litigation

Breach of Contract

A breach of contract is a legal cause of action in which a binding agreement or bargained-for exchange is not honored by one or more of the parties to the contract, by non-performance or interference with the other party's performance. If the party does not fulfill his contractual promise, has given information to the other party that he will not perform his duty as mentioned in the contract, or if by his action and conduct he seems to be unable to perform the contract; he is said to breach the contract.


Types of breaches

  • Minor breach: In a minor breach (a partial breach or immaterial breach), the non-breaching party cannot sue for specific performance, and can only sue for actual damages.


    Suppose a homeowner hires a contractor to install new plumbing and insists that the pipes, which will be hidden behind the walls, must be red. The contractor decides to use blue pipes instead, that function just as well. Although the contractor breached the literal terms of the contract, the homeowner cannot ask a court to order the contractor to replace the blue pipes with red pipes and he or she can only recover the amount of his or her actual damages. In this instance, this is the difference in value between the red pipes and the blue pipes. Since the color of a pipe does not affect its function, the difference in value is zero. Therefore, no damages have been incurred and the homeowner would receive nothing.

  • Material breach: A material breach is any failure to perform that permits the other party to the contract to either compel performance or collect damages because of the breach. If the contractor in the above example had been instructed to use copper pipes, and instead used iron pipes that would not last as long as the copper pipes would have lasted, the homeowner can recover the cost of correcting the breach, that is, taking out the iron pipes and replacing them with copper pipes.

  • Fundamental breach: A fundamental breach (or repudiatory breach) is a breach so fundamental that it permits the aggrieved party to terminate performance of the contract. In addition that party is entitled to sue for damages.

  • Anticipatory breach: A breach by anticipatory repudiation (or simply anticipatory breach) is an unequivocal indication that the party will not perform at the due date, or a situation in which future non-performance is inevitable. An anticipatory breach gives the non-breaching party the option to treat the breach as immediate, and, if repudiatory, to terminate the contract and sue for damages (without waiting for the breach to actually take place).

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