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Breach of Contract: What to Do and When To Do It

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By Christopher Coble, Esq. on May 07, 2015 9:55 AM

You run an efficient business. When you sign contracts, you expect them to be completed as agreed upon in the time period allowed in the contract.

So, what can you do if you get apples when you asked for oranges? Or, what happens when you ask for your bread delivery at 5 a.m. but don't get it until 7 a.m.?

If the other side breached a contract, what can you do, and when can you do it?

Material Breach vs. Minor Breach

The first determination you must make is whether the breach was material or minor.

A breach is material if the breaching party's actions are a substantial deviation from the requirements of the contract. A breach is minor if the non-breaching party received mostly what was asked for, and the breach is not drastically different from the terms of the contract.

For example, a delivery of 500 oranges when the contract was for delivery of 500 apples is a material breach. However, a delivery of 450 apples when the contract asked for 500 apples is a minor breach.

In case of a material breach, you, the non-breaching party, have the right to cancel of the contract, not perform your duties under the contract, and immediately seek remedies, such as filing a lawsuit.

In case of a minor breach, you will still have to perform under the contract, but can still recover some damages. For example, Fruit Co. only delivered 450 apples instead of 500. Because of that you had to buy 50 more apples from Apple Co. and had to pay $100 more. Since the breach is minor, you would still need to pay for the 450 apples, but can file suit to seek damages for the extra $100 cost.

This is a general rule that may be altered by statute or the terms of the contract.

Uniform Commercial Code

The Uniform Commercial Code (UCC) is a law that governs the sale of goods.

Under UCC section 2-508, if a seller gives you non-conforming products before the time for performance is expired, the seller may have an opportunity to cure the defect. Let's put that into plain English: If Fruit Co. delivered only 450 apples on Tuesday, and the deadline for performance in the contract is Friday, Fruit Co. can have until Friday to deliver the other 50 apples, before you can say they breached the contract.

Remember this rule only applies to contracts for the sale of goods, not services.

Terms of the Contract

When the UCC does not apply, look to the terms of your contract in case of breach. Does the contract give the breaching party a grace period after the deadline to perform? Does the contract say if one party fails to perform the contract on this day, the other party can immediately sue for damages?

A well written contract will provide you a guideline on what to do in case of a breach. If it does not, consult with an experienced business attorney.

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