Contracts are everywhere. Almost every time you agree to do something for someone else in exchange for them doing something for you, you've made a contract.
A contract involves provision of value on each side. A mere promise is not a contract. So, for example, a friend's promise to give you his car, unless you have promised to do something in return, cannot be enforced under contract law.
Because there are so many contracts, breaches of contract are also frequent. Normally these are trivial and you ignore them, but when they are not, you need expert representation.
What is a breach of contract?
When a contract is made, we call those making it the parties to the contract.
A breach of contract occurs whenever one party to a contract fails to perform their contractual obligations to the other party or parties, unless the failure does not constitute a breach.
There are many types of breach of contract and the entitlement to restitution ('the remedy' in legal terminology) depends in part on the type of breach of contract that has taken place.
What is not a breach of contract?
Not all contract failures involve breaches of contract. 'Frustration' is the legal term when something has happened which makes it impossible for the contract to be performed. When a contract is frustrated, it is simply cancelled and neither party can sue under it.
Most written contracts contain a 'force majeure' clause which cancels the contract in the event that something out of the control of the parties happens which prevents the contract being fulfilled.
Lastly, not all contract breaches are material. When the breach has little or no practical effect (such as using one brand of paint rather then another equivalent brand), it will not be worthwhile taking action over it.
Types of breach of contract
What are the different types of breach of contract?
There are many ways a contract can be breached. For example:
- One party can simply fail to do what they have agreed to do;
- The contract can be done wrongly or negligently; or
- The contract can be done too late.
Remedies for breach of contract
The usual remedy for breach of contract is that the party that has failed to perform its side of the bargain can be sued for damages by the other party for the losses that this causes to the other party. The principle here is to restore the person to the position they would be in had the breach of contract not occurred.
Another remedy is called 'specific performance'. In this case the court can order the refusing party to the contract to perform their side of the bargain.
A further remedy is that of 'rescission', where the party whose contract was breached cancels the contract. In this case, the party who committed the breach can still be sued so that the other party is in no worse position than they would otherwise have been.
Where a contract is badly or incompletely performed, the claim will be for damages.
What happens if a time limit is missed?
Unless a contract has specific time limits in it – as is common in many building contracts – the general rule is that it must be performed in a reasonable period. What is reasonable depends on the circumstances and the view of the judge!
Can I make an oral contract?
Although some contracts (eg for property purchase) can only be made in writing, most can be made verbally. However, it is in practice extremely difficult to enforce an oral contract in the absence of written evidence of its terms.
There are cases in the courts almost every month about the validity of oral contracts. It is always good advice to get contractual terms agreed in writing.
What is an unfair contract?
A contract can be inherently unfair, usually because one side to it 'holds all the aces' in the negotiation, it may be regarded as unfair. Unfair contracts are unenforceable in law and specific legislation (the Consumer Rights Act 2015) exists to regulate this area of law.
Can I add a penalty clause?
It is normal for a contract to contain a clause which sets out compensation to be paid in the event of a breach. However, the 'penalty' in the contract must be a genuine pre-estimate of the loss which would result. Where it is a true penalty clause, and the amount payable for breach exceeds the likely loss, it will be unenforceable under British law. Note that in some jurisdictions, penalty clauses are enforceable: just one reason why expert advice is doubly important if you are contracting with a foreign entity.
Can anyone make a contract?
Adults who are not suffering from a mental incapacity can make contracts. Persons under 18 years old can only make certain types of contract, and can specifically not make other kinds (eg they cannot contract to buy shares or freehold property).
What about a foreign contract?
It is normal to include a 'jurisidiction' clause in a contract setting out in which country's courts any dispute is to be settled. Contract law varies widely in different jurisdictions, and the rights of enforcement do also. British law is one of the preferred jurisdictions for settling contractual disputes, because it is highly developed. We would normally recommend stipulating British law as the applicable jurisdiction whenever possible.
How Selachii Can Help
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We don’t believe in simply handing out one-size-fits-all solutions to problems. We will focus on your specific circumstances before working out the best and most cost-effective way of helping you achieve your aims.
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