Legal principles to consider when suing for breach of contract
What is a contract?
In its most basic form, a contract is made up of four elements:
- An agreement: This involves both an offer, and an acceptance of that offer.
- Consideration: A promise to do something (such as paying money) in return for something.
- Intention: The parties must intend to create legal relations.
- Capacity: The parties must have the mental and legal capacity to form that contract.
Each of these elements would be topics for an article of their own, but for current purposes, if each of these elements are present, then a legal contract is likely to have been formed.
When we think of contracts we usually imagine a formal written document, but contracts can also be created verbally or by actions alone.
Contracts are formed countless times every day; when you buy something from the shops, when you use public transport, the contract you have with your employer… the list goes on.
With so many contracts being entered into, it is inevitable that breaches will occur. But what constitutes a breach of contract and what remedy is available to you if a breach occurs?
Breach of contract
There are different types of breach, and each type determines what remedies you might be be entitled to when suing for breach of contract. The different breaches are:
- Minor breach of contract – Commonly referred to as a ‘partial’ or ‘immaterial’ breach of contract. This occurs where there is a slight deviation to what was agreed. For example, you order a product online and it is substituted for something similar, or the item is delivered slightly later than agreed. Because the breach is so minor, you would need to show that the breach has caused real financial loss for a remedy to be available.
- Material breach of contract – This is a breach that results in a substantially different outcome to that agreed. This would be where the item substituted is of substantially less value than the item ordered, or the delivery is late and the item you required was desperately needed, resulting in financial loss.
- Anticipatory breach – This occurs where a breach has yet to happen, but one party shows an intention not to fulfil their obligations under the contract. In our scenario this would apply where the delivery company does not intend to deliver the items you have ordered or will not deliver them by the agreed date. Once the agreed date for delivery passes, the anticipatory breach will turn into either a minor or material breach, depending on the consequences of the late delivery.
- Actual breach – This term is used to describe a complete failure to perform certain obligations under the contract, or perform them to an adequate standard, and can include minor or material breaches.
Remedies for breach of contract
There are several potential remedies available when suing for breach of contract. The most common remedy available for a breach of contract is compensatory damages. Simply put, this is where compensation is paid to the innocent party for the actual losses suffered because of the breach. Taking the delivery scenario again, if you order a product worth £50 but it never arrives, or is significantly damaged upon arrival, then you may be entitled to your £50 back. Similarly, if you order a product for commercial purposes and you lose business as a result of late delivery, then you may be entitled to compensation for those business losses if you can show that they were directly caused by the breach of contract.
Things become more complicated when ‘equitable’ remedies are introduced. These remedies are purely discretionary, meaning it is up to the court if they should be granted, and are not available as of right. One example of an equitable remedy is ‘specific performance’. This is where the court will order the breaching party to perform their end of the bargain. The delivery company may be ordered by the court to deliver the product purchased or replace the damaged one.
How we can help you with suing for breach of contract
If a contract you have entered into has been breached then you may be thinking about suing for breach of contact.
The first thing to consider is the likely value of your claim. For losses valued at up to £10,000 you may wish to consider pursuing your case in the small claims court. The small claims court is designed to be used by the parties themselves without the involvement of professional lawyers, and because legal costs aren’t usually recoverable (even if you win) we rarely get involved in those cases.
However, if the value of your case exceeds £10,000 and you are interested in appointing solicitors then we will be happy to review the case to see whether it is one which would be legally and commercially viable for us to deal with.
Contact us on 0333 888 0404 or email us at [email protected].