The simplest definition of a contract is an agreement between two or more private parties. A contract creates mutual legal obligations and may be in written form or oral form.
A valid and legally enforceable contract is required to contain the following information:
- An offer;
- An acceptance of the presented offer;
- A promise to perform;
- A valuable consideration;
- The time or event when the performance must be made;
- The specific terms and conditions for the performance; and
- What should happen if one or both parties fail to abide by the terms of the contract.
Are There Different Types of Contracts?
Yes, there are different types of contracts. Unilateral contracts involve a promise in exchange for a specific performance.
Bilateral contracts involve a promise in exchange for a promise. Other types of contracts include:
- Express contracts, which usually specify orally or in writing the exact terms of the contract;
- Conditional contracts, which are based upon a completion of a condition;
- Joint and several contracts, which involve multiple parties;
- Implied contracts, where a court finds that a contract exists based on the circumstances;
- Unconscionable contracts, which put one party at a greater advantage than another one and are considered unjust;
- Adhesion contracts, which are considered to give one party more bargaining power than another and therefore result in a “take it or leave it” type situation;
- Option contracts, which allow a party to enter to another contract with another party at a later time; and
- Fixed prices contracts, which involve a buyer and a seller agreeing to pay a fixed price for a project.
How are Contracts Drafted?
Although a contract may be drafted by an individual, it is highly recommended that an attorney draft and review the final terms of a contract to ensure that it is legally valid and binding. The parties to a contract will typically be the ones to determine how a contract will be drafted.
However, it may also depend upon the type of contract which is being created. For example, an employment contract often contains certain provisions and specific terms which differ from language found in confidentiality agreements.
In general, the majority of contracts are required to follow a basic format and to include standard components, such as:
- Important words which need to be defined;
- Legal terminology which indicates the beginning of the contract or signals the end of the contract, such as a signature block;
- The rights and duties of the parties;
- How the parties are permitted to terminate the contract;
- General provisions; and
- Special clauses, such as in insurance policies.
Additionally, regardless of the type of contract formed, it must contain the following elements to be valid and enforceable:
- An offer;
- The acceptance of that offer;
- Consideration, usually money;
- The contract must identify its parties and those parties must possess the legal capacity to enter into the agreement;
- The subject matter of the contract must be legal. For example, an individual cannot create a contract to hire a hitman;
- There must be mutual agreement between the parties; and
- The parties must have a mutual understanding of their rights and duties under the contract.
There are many contracts which also contain specific terms and conditions. Common contract drafting terms and conditions may include:
- Force majeure;
- Arbitration clause;
- Indemnification;
- Assignment;
- Confidentiality;
- Warranties;
- Choice of law and forum selection;
- Time is of the essence clause;
- Severability; and
- Liquidated damages clause.
The terms and conditions listed above pertain to:
- Events which trigger conditional consequences;
- Duties which the parties are legally obligated to perform; or
- Activities which the parties must refrain from or they risk breaching the contract.
What is a Breach of Contract?
A breach of contract occurs when the agreements between the parties are not kept because one party does not fulfill their obligations under the contract. Examples of how breaches of contract may occur include, but are not limited to:
- One party failing to perform in the specified timeframe;
- One party fails to perform at all;
- One party performs, but not in accordance with the terms of the contract; and
- One party fails to sign and verify the contract.
If either party fails to fulfill their legal obligations under the contract, that party is considered to have breached the contract. The party who experienced loss due to the breach of the other party may be compensated for their losses.
Although the general rules of contract law apply, it is important for a contract to contain a provision regarding what should be done in the event of a breach. A breach of contract can be:
- Minor;
- Material;
- Fundamental; or
- Anticipatory.
This article will examine the differences between minor and material breaches of contract.
What is a Minor Breach of Contract?
A minor breach of contract occurs when one of the parties substantially performs, or meets the essential obligations of the contract, but does not fulfill a minor condition. The breach of this minor condition does not significantly affect the terms of the contract.
When a minor breach occurs, the other parties to the contract can otherwise fulfill any remaining contractual obligations in spite of the breach. Minor breaches may also be referred to as partial breaches.
Although this type of breach may be minor, the non-breaching party is still permitted to sue the breaching party for any damages which were caused by their failure to perform the minor element. Minor breaches require all parties to still complete their obligated performance of the contract.
On the other hand, a party would not be required to perform their part of the contract if a material breach occurred.
What is a Material Breach of Contract?
A material breach of contract is a breach which is so substantial that it excuses the non-breaching party from performing their duties under the contract. For example, if a buyer is purchasing a home and the seller refuses to hand over the keys to the home even though the buyer fulfilled their terms under the contract, the seller’s conduct would constitute a material breach.
A material breach is a breach which is so substantial that it impairs the entire contract as a whole and renders the purpose of the contract defeated. Material breaches may also be referred to as complete breaches.
What Can be Done About a Minor or Material Breach?
The main distinction between minor breaches and material breaches is their severity. Material breaches are considered more serious and make completing the contract difficult or even impossible.
Minor breaches are insignificant enough that the remainder of the contract can still be completed in a satisfactory manner. As previously noted, the non-breaching party may sue for damages which are caused by the minor breach.
However, both parties will be required to render necessary further performance to complete the contract. If either party refuses to fulfill the remaining terms of the contract, they may be held liable for a material breach.
Once a party has committed a material breach, the non-breaching party may refuse to perform. At that time, they may sue the breach party either to compel their performance or to receive compensation for damages which were caused by the breach.
If a material breach occurs, it is important for the non-breaching party to document the exact nature of the breach and ensure that it actually does violate the contract. The majority of contracts contain provisions outlining what should be done in the event of a breach in order to minimize the harm which both or one party may experience.
Do I Need an Attorney for a Minor or Material Breach of Contract?
It is essential to have the assistance of a contract attorney for any issues, questions, or concerns you may have related to a minor or material breach of a contract. You should consult an attorney immediately if a contract you are involved in is breached.
Your attorney can advise you regarding contract laws in your state and review your contract to determine what remedies may be available. Your attorney can determine the type or breach which occurred, file a lawsuit on your behalf, and represent you in court.
