Businesses use contracts to establish contractual obligations with other businesses. There are many uses of contracts, such as arranging the transportation of goods, planning construction projects and outlining services.
While a contract can clearly outline and establish what each party is expected to provide or fulfill, a breach can disrupt business operations and lead to serious damages. Here are four of the most common types of contract breaches:
Minor breach
A minor or partial breach goes against the terms of an agreement but does not lead to major damages. Typically, a contractual obligation is fulfilled despite a minor breach. For example, a product may have been delivered a day later than what was established in a contract. However, the business still received the entire product and was able to use it without any issues.
Material breach
A material breach occurs when a significant issue goes against the terms of a contract. For example, a contractor may order a shipment of gravel for a construction project. However, the delivered goods contained mulch. This type of breach can cause massive financial losses, as well as damage to reputations.
Actual breach
An actual breach occurs when a party refuses to fulfill its contractual obligations. For example, a construction company may refuse to install a new bathroom in a house after removing the original bathroom. Their refusal may cause the other party to cancel the contract and seek damages.
Anticipatory breach
An anticipatory breach occurs when a party is aware that an issue will make it difficult for them to fulfill their contractual obligations. For example, a storm may have caused damage to a new building project. As a result, the construction company is aware that the damage would cause them to breach the expected fulfillment date.
Professional legal guidance can help businesses address a contract breach in a way that makes sense and causes the least amount of damage.