Is This a Breach of Contract? (2023)
As a business or individual, you probably enter into many different contracts, and often without giving them a second thought. Although it is a good practice to review every contract carefully, sometimes it is just not feasible, it is too inconvenient, or just not worth the time depending on what the contract is about. However, when something goes wrong with the performance of a contract, reading and understanding the fine print becomes essential to knowing the consequences.
Here are some tips to understand a contract.
Read the Contract
I know, the obviousness of this tip is apparent, however, it is essential to actually read the contract, even if just skimming through and identifying some of the main provisions. If a breach of contract issue ever ends up in a Utah court, the court will usually give the greatest weight to the actual text of the contract. So, if you want to really see what the contract means—read it.
Identify Obligations
When a contract is formed, there is usually an exchange of promises between two parties. In legal terminology this is usually referred to as consideration as one party’s promise to perform is given in consideration of the other party’s promise to perform something else. For example, in the case of a phone bill, you promise to pay the phone company ‘x’ dollars and in turn they promise to provide you with service.
When you are reviewing a contract, look for what obligations there are for each party. What are your obligations and what are the other party’s? In theory it is simple, however, perhaps your phone service is going out intermittently and you feel like the phone company is not performing their end. But, when you review their obligations the contract states that they only promised to provide reasonable phone service and that service may from time to time be irregular. In short, look for what the promises/obligations of each party are and be specific about it.
Conditions of Performance
Closely related to the promises/obligations each party exchanges is whether there are any conditions attached to those promises. For example, is the phone company required to provide you service if you do not pay your bill? Probably not. That is because their obligation to provide you service is likely conditioned on you paying them.
Sometimes contracts can have not so clear language that makes it tricky to determine if a condition exists or when a condition has been met. This can be a significant problem, especially for contracts where there are strict timelines of performance and one party feels like they do not have to perform their end of the deal because the other party did not perform theirs. A contract can quickly fall apart in this type of situation.
Is the Breach Material?
In the eyes of the law, there are a few types of breaches of contract, and here we will focus on two. The first is a material or total breach and the second is a partial breach. There are similar terms that are used across different jurisdictions but the general idea is that the material or total breach can in some cases justify non-performance of the contract by the non-breaching party and the partial breach usually does not. Determining whether a breach is a material breach or partial breach is a factual one that relies on the text of the contract and the intent of the parties in coming to their agreement.
Material breaches are often classified as breaches that go to the heart of the contract, the very purpose of even forming it in the first place. For example, if a phone service does not work 90% of the time, then arguably that goes to the heart of the contract and defeats the purpose of even having signed up for the phone service.
Partial breaches are those that are not big enough to impact the entirety of the contract, but still give the non-breaching party some sort of remedy for the wrong. For example, if you hire a contractor to paint your house and the quality of the job is mediocre but they still completed it. This could be considered more of a partial breach and not a material or total breach depending on the contract. The remedy might be that the contractor is not entitled to the full payment. In the case of a partial breach, the non-breaching party must typically continue to keep their end of the deal but they are entitled to a remedy for the wrong.
Lastly, and this is important, the contract itself may often identify events that are or are not considered material breaches. For example, your phone company may say that non-payment of your bill for a period of more than 30 days is considered a material breach and gives them the right to terminate the contract and that unless your phone service goes out for a period of more than 7 days that it is not a material breach and you are only entitled to a credit on your bill for the down-time. Look for and identify this events of default or breach, they are powerful.
Have You Met Your Obligations?
Even if a contract has been breached, you may still have to perform certain obligations under the contract. Depending on what the actual terms of the contract are, there might be a resolution or notice process that you agreed to follow instead of simply terminating the contract.
What are the Remedies?
A contract may specifically list what kind of remedies are available in the case of a partial or material breach. Identify what rights each party has in the case of a breach.
Breach of contract issues are generally very fact intensive. If you think you may have a breach of contract issue or need help with a contract, contact a licensed attorney to help you.
