A material breach would occur if Company A never offers an explanation or fails to propose an alternative, but simply doesn’t deliver the parts, putting Company B at risk of not meeting its business goals and suffering economic damages.
An immaterial breach might apply if Company A delivers a partial amount on Wednesday and promises the rest on Friday, or if Company A announces in advance that its delivery will be delayed and gives a valid reason. Needless to say, if a breach of contract dispute goes to court, arguments over material versus immaterial can become serious.
If you’re the party that has suffered a breach of contract by another party to the agreement, to prevail in court you must:
- Prove the existence of a contract
- Prove that you performed your part according to expectations or had a valid reason not to do so
- Prove that the other party failed to perform their responsibilities as agreed
- Prove that you suffered damages as a result of the other party’s nonperformance
Anticipatory Repudiation or Anticipatory Breach
An anticipatory breach — also known as anticipatory repudiation — occurs when one party exhibits an absolute refusal to perform as expected. The expected breach cannot be merely an assumption by the other party that a breach will occur. Words or actions of the breaching party must confirm the anticipatory repudiation. For instance, if Company A that provides the parts suddenly shifts production to supply parts to another company at a higher price, an anticipatory breach might be expected.
Still, the performing (or potentially aggrieved) party must sometimes maintain adherence to its part of the agreement for the time being. For instance, if the anticipated breach concerns the sale of goods, the Uniform Commercial Code (UCC) observed by Tennessee asks the non-breaching party to seek assurances that the terms of the contract will be met. In the meantime, they can withhold payment. Once 30 days have passed with no response or a negative one, then the breach becomes official, and legal action can result.
If a breach of contract issues goes before a court, there are three types of remedies available:
- Compensation: The court can award damages equal to the loss caused by the breach, covering for income that would’ve been received had there been no breach. Punitive damages can also be assessed if the court finds the breach particularly egregious. Finally, there may be liquidated damages if these were specified in the original contract.
- Specific Performance: The aggrieved party may request that the breaching party live up to its part of the contract. This can be the case if the product or service provided by the breaching party is so unique that it cannot be easily replaced.
- Cancellation and Restitution: The aggrieved party can cancel the contract and then sue for compensatory damages equal to the income they would’ve realized had there been no breach.
Trust a Skilled Business Law Attorney
Whether you’re being accused of breaching a contract, or you feel you’re the victim of a breach, you will need strong and experienced legal guidance. Breach of contract disputes can be complex and messy. Even the terms of a written contract can often be subject to interpretation. When the contract is deemed oral or implied, then it can become a matter of who remembers what the agreement stipulated, or even if there was an agreement. Remember, the first step in a breach of contract lawsuit is proving the existence of a contract, and this can work in favor of both parties in a contested breach.
A well-written contract will contain language for dealing with disputes such as breaches, perhaps calling for binding arbitration. Barring that, negotiation is often the first choice to resolving contractual disputes, as a lengthy courtroom battle can eat up a lot of time and resources that are better spent growing your business. You should be aware that the willingness to litigate — or fight your case in a courtroom — creates valuable leverage that is crucial to obtain a positive outcome.