A breach of contract dispute is not part of personal injury law and isn’t a tort, or a wrongful act that causes harm or injury. Contract law is its own category within the civil court system that deals with agreements and obligations established through a contract. The contract is breached when one party fails to fulfill their obligations.
In other words, tort law is about duties imposed by law; contract law is about duties the parties voluntarily assume by agreement.
A contract is the foundation of most business and personal agreements. It’s essentially a legal promise that needs to be upheld by each party—and if one party fails to uphold their end of the deal, then the injured party might be able to file a breach of contract lawsuit.
However, not every promise is a contract. A valid claim for breach of contract must have specific legal elements for a court to recognize and enforce.
What is a breach of contract?
Black’s Law Dictionary defines breach of contract as “[a] violation of a contractual obligation by failing to perform one’s own promise, by repudiating it, or by interfering with another party’s performance.”
In essence, this means if you don’t hold up your side of the deal, then you can be sued—and vice versa.
Most common breach of contract claims
- Failure to pay. This is common in business-to-business (aka “B2B”) transactions, service agreements, and loan contracts.
Breach: Nonpayment or late payment
- Failure to deliver goods or services. This is common in supply chain contracts, event planning, and construction industries.
Breach: Nonperformance
- Defective or substandard performance. This is common in construction, IT/software development, and product manufacturing.
Breach: Improper or deficient performance
- Failure to meet deadlines. This is usually in delivery agreements, publishing, and freelance contracts.
Breach: Untimely performance
- Violation of non-compete or confidentiality. For example, employment and contractor agreements.
Breach: Restrictive covenants or confidentiality clauses
- Employment contract breach. This happens when an employer fails to pay agreed-upon bonuses or an employee quits without notice despite a term requiring it.
Breach: Breach by employee or employer for failing to meet terms of employment agreement
- Real estate or lease agreement breaches. This might be a tenant who breaks a lease too early or a landlord who fails to make agreed-upon repairs.
Breach: Breach of lease terms, purchase and sale agreements, or warranty of habitability
- Breach of warranty or guarantee. A product doesn’t meet the specifications promised in the contract or warranty, such as in sales contracts, consumer products, or vehicle and appliance warranties.
Breach: Breach of express or implied warranty
Types of contract breach
Each of the claim types above falls into one of four categories:
- Material breach: This is a serious failure that defeats the purpose of the contract and allows the other party to terminate and file a lawsuit.
- Minor breach: Although a less significant violation, there could be damages awarded for a minor breach. However, the contract would remain in effect.
- Anticipatory breach: One party acknowledges ahead of time that they don’t intend to fulfill their contractual obligations.
- Actual breach: A party fails to perform by the agreed-upon deadline.
What makes a contract valid?
In order to file a claim for a breach of contract action, there has to be a valid contract in the first place. Not every agreement meets the standard of an enforceable contract.
In order to have a legally binding contract, there must be these elements:
| 1. | Offer | One party proposes an agreement |
| 2. | Acceptance | The other party agrees to the terms |
| 3. | Consideration | Something of value is exchanged by both parties |
| 4. | Mutual intent to be bound | Both parties intended the agreement to be enforceable |
| 5. | Legality | The contract is for a lawful purpose |
A contract may be written, oral, or implied—but a written contract is easiest to enforce and prove.
How does a plaintiff prove a breach of contract?
If a plaintiff moves to file a breach of contract claim, they must first show that they fulfilled their obligations under the contract, or they had a legal justification for not doing so.
For example, if you agreed to pay for services and did so on time, you’ve completed your obligation under the contract.
They then need to prove the defendant failed to perform their duties under the contract. There are several ways a defendant could breach the contract, but some of them include:
- Nonperformance, or not doing what was promised
- Defective performance, or not doing it correctly or completely
- Delays, or failure to meet deadlines
- Anticipatory breach, or informing that they won’t follow through
Type of damages a plaintiff can recover in a breach of contract lawsuit
To recover damages—or compensation—the plaintiff must show they suffered harm because of the breach. Usually, this is in the form of financial damages, but it could also include lost opportunities or business reputation.
- Compensatory damages that cover actual losses
- Consequential damages for foreseeable losses beyond the contract
- Liquidated damages, or pre-agreed penalties in the contract
- Specific performance, which forces the breaching party to do what they promised
- Rescission, or cancelling the contract and restoring each party
How to file a lawsuit for breach of contract
Step one: Confirm there’s a valid contract
The agreement must meet the requirements set forth above:
- Offer and acceptance
- Consideration (exchange of value)
- Mutual intent to be bound
- Legality
- Capacity (both parties were legally able to enter into a contract)
Step two: Identify the breach
Determine what obligation was broken and whether it constitutes a material breach (significant failure that affects the outcome) or minor breach (smaller infraction that may not invalidate the contract). You can ask yourself three questions:
- Did the other party fail to perform or deliver as promised?
- Did their actions cause financial or reputational harm?
- Can you prove it?
Step three: Document, document, document!
Gather your evidence and have it organized before you meet with a lawyer. Evidence can include:
- The contract, itself
- Emails, texts, invoices, and receipts
- Proof of payment or proof of your performance
- Written complaints, notices, or demands you sent
- Evidence of the other party’s refusal or failure to perform
- Records of damages or losses suffered
Step four: Send a demand letter
It’s typical (and sometimes required) to file a formal demand letter to the breaching party. This letter should include:
- A clear description of the breach
- A request for a specific remedy
- A deadline to respond
Step five: Consult an attorney
A contract or commercial litigation attorney can help you, particularly in a complex case. Your lawyer will:
- Assess the strength of your case
- Explain potential remedies and risks
- Avoid procedural mistakes in the legal process
Note: You can choose to file a claim in small claims court; this is for lower-value cases (usually under $10,000, but this varies by state) and does not require a lawyer.
Step six: File a lawsuit
Where?
- Small claims court, for lower-value disputes
- State civil court, for larger claims
- Federal court, if the contract involves parties from different states and the amount in controversy exceeds $75,000
How?
- File a complaint that states your claim, the breach and what you’re seeking
- Pay the filing fee
- Serve the defendant with summons of process
Step seven: Discovery, pretrial process, and trial
If the parties can’t come to an agreement, each side moves forward in this information-gathering stage of litigation.
- Exchange evidence (discovery)
- Attend hearings or attempt mediation
- You might be encouraged by the court to try to reach a settlement
If a settlement can’t be reached, the case proceeds to trial. The judge or jury hears the evidence, each side presents arguments and witnesses, and a verdict is issued.
Step eight: Judgment and remedies
If you win your case, the court could award the following types of damages:
- Compensatory, to cover actual losses
- Consequential, for losses caused indirectly by the breach
- Specific performance, requires the other party to fulfill the contract
- Rescission, cancelling the contract and restoring both parties
- Attorney’s fees and costs, in some circumstances