The Different Types of Breach of Contract

What is the definition of breach of contract?

At its core, breach of contract means breaking the terms of a written or verbal agreement. Breach of contract sounds pretty straightforward. Either you do it or you don’t, but in practice it often leads to complex business litigation cases depending on the severity of the breach.

What Is a Fundamental Breach of Contract?

The most obvious type of breach of contract is a fundamental breach. This type of breach of contract is so egregious that the injured party can cancel the contract entirely and sue for damages. For example, a computer manufacturer orders chips from a supplier. The chips never come, the computers can’t be built and the computer manufacturer can’t fill a big order thus losing tons of money. The computer manufacturer can then sue the chip supplier for compensatory damages and possibly punitive damages.

What Is Material Breach of Contract?

A more common type of breach of contract is a material breach of contract. This happens when the contracted party performs some or most of what they promised to do. For example, a contractor who doesn’t finish a remodeling job or a supplier who fills part but not all of your order. The injured party can then refuse pay the contractor for unfinished work, hire someone else to finish the job and sue the contractor for the difference.

What Is Minor Breach of Contract?

A minor breach of contract is similar to a material breach of contract because it involves only partially finishing a job or filling an order. A minor breach differs from a material breach in that the offense does not rise to the level of the aggrieved party being able to cancel the contract. They can sue but they can’t walk away. A supplier who delivers a product late thus delaying the production of the final product is an example of a minor breach of contract.

What is an Anticipatory Breach of Contract?

Also known as “repudiation,” anticipatory breach is a particularly rare form of breach of contract where one of the parties indicates via words or actions that they are not going to meet their end of the contract. This then gives the injured party the right to sue. Let’s say “Rich Guy” contracts with “Yacht Builders” to build him a boat to impress his friends and enemies. After the contract is signed, Rich Guy finds out his nemesis has gold bathroom fixtures on his yacht and decides he needs platinum fixtures on his boat but refuses to pay more for them. Yacht Builders could sue him for anticipatory breach of contract.

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