What Are the Elements of a Breach of Contract Claim?
April 30, 2024
Contracts serve as a foundation of trust and accountability for both personal and business relationships. They are legally-binding agreements that outline the rights and obligations of each party and make sure the expectations of both parties are clear and enforceable.
However, situations may occur where one or more parties fail to hold up their end of the agreement, leading to a "breach of contract." Such breaches can disrupt business operations, lead to financial losses, and damage professional relationships.
Understanding the elements of a breach of contract claim is crucial for businesses and individuals to protect their interests or pursue legal action for contractual disagreements. At McCarter | East PLLC, located in Murfreesboro and Woodbury, Tennessee, we are well-versed in contract law and can help you better understand what constitutes a breach of contract.
What Is a Contract?
Contracts are legally-binding agreements that detail the promises between two or more parties. In Tennessee, common contracts include employment, services, and the sale of goods. For a contract to be valid in the eyes of the law, it must contain certain elements, such as:
Offer: A proposal made by one party to another, outlining the terms of the agreement
Acceptance: Occurs when the other party agrees to the terms of the offer
Consideration: Something of value that each party exchanges as part of the contract (money, goods, services, or promises)
Intention to create a legal relationship: Both parties must enter into the contract with the intention of creating a legally-binding agreement
Tennessee law also recognizes various types of contracts, such as unilateral, bilateral, and implied-in-fact, and each has specific legal requirements and implications. All parties involved should clearly understand the nature and terms of the contracts they enter to identify potential breaches and pursue legal responses.
What Is a Breach of Contract?
A breach of contract occurs when one party fails to fulfill their obligations that are specified in the contract. This can be due to non-performance, insufficient performance, or rejection of the contract. A breach can also involve a violation of specific terms, such as deadlines, quality standards, or payment terms.
When one party breaches a contract, it often leads to disagreements and disputes between all the parties involved. Resolving these disagreements usually requires the plaintiff (or non-breaching party) to determine whether there has been an actual breach of contract.
Material vs. Non-Material Breach of Contract
A material breach of contract is a violation of the agreement that strikes at the heart of the contract's purpose, significantly impairing the aggrieved party's benefits as outlined in the contract. A material breach typically justifies the termination of the contract by the non-breaching party and may lead to substantial damages or specific legal action.
On the other hand, a non-material breach refers to a minor violation that, while technically a breach, does not fundamentally undermine the contract's intended purpose. These breaches may result in some form of damages but generally do not grant the non-breaching party the right to terminate the agreement altogether. Instead, the contract remains in force, and remedies are often limited to compensation for the direct damages incurred.
Elements of a Breach of Contract Claim
To determine whether there has been a breach of contract, the plaintiff must prove the following:
Prove That a Valid Contract Exists: Determine whether there is a legally-binding agreement between parties. This involves demonstrating that there was an offer, acceptance, consideration exchanged, and a mutual intention to be bound by the terms of the agreement.
Prove You Performed Your Part According to the Expectations of the Contract: Demonstrate that you have upheld your end of the contract in good faith and met all obligations as outlined in the agreement.
Prove the Other Party Failed to Perform Their Part: The plaintiff must show that the defendant failed to perform their duties as specified in the contract. This can take various forms, including non-performance, substandard performance, or an indication that the performance will not be completed as required.
Prove You Suffered Damages Due to the Breach: The breach must have resulted in financial or non-financial harm to the plaintiff. These damages must be proven with reasonable certainty, meaning there must be quantifiable evidence of the loss suffered as a direct result of the breach.
Under certain circumstances, a party may be excused from fulfilling their contractual obligations. This could include the impossibility or impracticability of performance or the existence of a condition that has not been met. However, if no valid legal defense exists, a breach of contract can be established and legal action can be pursued.
Potential Consequences of Breach of Contract
A breach of contract can lead to several potential consequences for the party at fault. These consequences are designed to rectify the situation and provide compensation to the injured party. Depending on the severity and the specifics of the breach, consequences may include:
Damages: This is the most common remedy for a breach of contract. The non-breaching party can seek various types of damages, including compensation (to cover direct losses), consequential (for additional losses), and punitive (to punish the breaching party).
Specific Performance: In certain cases where monetary damages are inadequate to remedy the harm caused, the court may order the breaching party to perform their obligations under the contract. This is more common in contracts involving unique items or properties.
Cancellation and Restitution: The non-breaching party may have the option to cancel the contract, relieving them of any future obligations under the agreement. In addition, the non-breaching party may be entitled to restitution or compensation for any benefits conferred to the breaching party under the contract.
Reformation: If the breach is due to a misunderstanding or a misrepresentation of the contract's terms, the court may modify the contract to accurately reflect the parties' intentions.
These remedies serve to address the imbalance caused by the breach and aim to restore the injured party to the position they would have been in had the breach not occurred. The precise consequence imposed will depend on the nature of the breach, the type of contract, and the extent of the damages or loss incurred.
Tips for Avoiding a Breach of Contract
When it comes to breaches of contract, prevention is the best strategy to pursue. Some preventative measures both parties can implement to avoid potential disputes include:
Clearly Draft and Understand the Contract: Make sure all terms and conditions are clearly outlined and understood by both parties.
Maintain Timely Communication: If there is an indication that a contract obligation cannot be fulfilled, communicate this to the other party to discuss solutions and prevent escalation.
Seek Legal Counsel: Getting legal advice when drafting, reviewing, or addressing potential breaches in contracts can be invaluable. Knowledge of Tennessee contract law and experience in dispute resolution are necessary to protect your interests.
Seek Experienced Legal Counsel
Understanding a breach of contract claim is not only beneficial but necessary for anyone under contractual agreements. It's important to be familiar with the elements that define a breach, the potential consequences, and best practices for avoidance and resolution.
If you find yourself in a situation involving a suspected breach of contract, seek the counsel of an experienced Tennessee business attorney. At McCarter | East PLLC, located in Murfreesboro, just a few blocks from the courthouse, and Woodbury, Tennessee, we can help you safeguard your business dealings and work toward fair outcomes in the event of a breach.