Companies today rely on contracts when undertaking business engagements with each other. Through these contracts, they identify the parties they will transact with and mutually agree on the deliverables.
Ideally, all parties to a contract should fulfill their responsibilities. However, sometimes, one party fails to fulfill its responsibilities. When this happens, the contract is breached. Because a contract is a legally enforceable agreement, the party that suffers damage due to another’s breach can sue them in court. In this case, the party that has suffered injury will be the plaintiff, and the party in breach will be the defendant.
To succeed in a breach of contract suit, the plaintiff must prove to the court several things. These are: that a valid contract existed between the two parties, that they performed their contractual responsibilities, that the defendant failed to fulfill its duties, and that the defendant’s breach occasioned the plaintiff’s losses.
The plaintiff must first prove that a contract existed between it and the defendant. A contract should exist, but it must also be valid since only valid contracts are legally enforceable. For a contract to be valid, it must have all the essential elements of a contract, including an offer by one party to another, an acceptance by the other, an exchange of something valuable (consideration), and execution by both parties. Both parties must have the legal capacity to enter into a contract, and the contract must not be for the performance of an illegal act.
After proving a valid contract existed, the plaintiff must show that it fulfilled its responsibilities as established in the contract. The defendant failed to honor its end of the agreement (breached the contract). The court recognizes various types of breaches of contract, including minor and material breaches.
A breach is minor when it only involves some of the terms of the agreement but does not reach its core. For example, if a contract is for the sale of a car and the seller agrees to deliver a Mustang to the buyer with a radio inside, and the seller delivers the car without the radio, the breach is minor. This is because it affects some terms of the contract but not its core, which is the sale of a car. A material breach goes to the core of the contract. One party fails to perform its responsibilities entirely or fails to deliver on the core terms.
Finally, the plaintiff must also show that it suffered an injury due to the breach of contract. These are usually financial losses. If a plaintiff is successful in its suit, the court may give an order of specific performance requiring the defendant to fulfill its contractual responsibilities or award damages to the plaintiff. The damages can be compensatory, bringing the plaintiff to the position it would have been in had the breach not happened, or punitive, to punish the defendant for the breach. The court may also cancel the contract, relieving all parties of their contractual duties.
The defendant, however, has various defenses it can use to defeat the plaintiff’s claim. For example, it can argue the contract was invalid, say for lack of capacity, execution, or intention to enter into the contract. The defendant can also argue the impossibility of performance (that it cannot perform its responsibilities because of factors beyond its control), that the suit is time-barred by the statute of limitations, or that the plaintiff waived its right to claim against it for breach.
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