A contract is a legally binding promise made between two parties. Each party to a contract promises to perform a certain duty, or pay a certain amount for a specified item or service. The purpose of a contract being legally binding is so each party will have legal recourse in the event of a breach.
A breach of contract occurs when the promise of the contract is not kept, because one party has failed to fulfill their agreed upon obligations, according to the terms of the contract. Breaching can occur when one party fails to deliver in the appropriate time frame, does not meet the terms of the agreement, or fails perform at all.
Further, if one party fails to perform while the other party fulfills their obligations, the performing party is entitled to legal remedies for breach of contract.
There are four main types of contract breaches:
- Minor Breach: A minor breach of contract occurs when a party fails to perform a part of the contract, but does not violate the whole contract. To be considered a minor breach, the infraction must be so nonessential that all parties involved can otherwise fulfill any remaining contractual obligations. A minor breach is sometimes referred to as an impartial breach;
- Material Breach: A material breach of contract is a breach that is so substantial, it seriously impairs the contract as a whole; additionally, the purpose of the agreement must be rendered completely defeated by the breach. This is sometimes referred to as a total breach. It allows for the performing party to disregard their contractual obligations, and to go to court in order to collect damages from the breaching party;
- Fundamental Breach: A fundamental breach of contract is essentially the same as a material breach, in that the non-breaching party is allowed to terminate the contract and seek damages in the event of a breach. The difference is that a fundamental breach is considered to be much more egregious than a material breach; and
- Anticipatory Breach: An anticipatory breach occurs when one party lets the other party know, either verbally or in writing, that they will not be able to fulfill the terms of the contract. The other party is then able to immediately claim a breach of contract and pursue a remedy, such as payment. Anticipatory breach may also be referred to as anticipatory repudiation.
What is the Difference Between an Oral Contract vs. a Written Contract?
An oral contract is a contract in which the terms are agreed upon verbally, whereas a written contract is a written document. Generally, oral contracts are enforceable and legally binding; however, not every type of contract can be enforceable when they are oral as opposed to written.
Some specific types of contracts must be in writing in order to be enforceable. These may include:
- Contracts involving the sale or transfer of land;
- Promises to pay someone’s debt obligations for them;
- Contracts that cannot be completed within one year of the creation of the contract;
- Contracts involving the sale of of goods for more than five hundred dollars; or
- Contracts that will extend beyond the lifetime of one of the involved parties, therefore leaving the terms and conditions of the contract in the sole knowledge of the living party.
Directorate General Of Foreign Trade | Ministry Of Commerce And Industry | Government Of India,Trade 