What Does It Mean to Be in Breach of Contract?
A breach of contract occurs when one party fails to fulfill its obligations under a legally binding agreement. This failure can take various forms, from minor infractions, such as late payments, to major violations, like failing to deliver a promised asset.
As an experienced civil litigation attorney in Clinton, Maryland, I've helped many clients facing breach of contract cases better understand their rights and the best actions to take. Allow me to clarify what constitutes a breach, the types of breaches, and the remedies available.
Defining Breach of Contract
A contract is a legally enforceable agreement between two or more parties. When one party doesn’t perform as promised, they’re said to be in breach of the contract. The breach can manifest in several ways:
Failure to perform: One party doesn’t fulfill their obligations as stipulated in the contract.
Making performance impossible: External factors or actions by one party render the performance of the contract impossible.
Refusal to perform: One party outright refuses to perform their contractual duties.
In Maryland, the determination of a breach is guided by the terms of the contract and, in the absence of specific provisions, by general principles of contract law.
Types of Breaches
Breaches can be categorized based on their severity and impact on the contractual relationship:
Material Breach
A material breach is a substantial failure to perform a term that is essential to the agreement. A breach is considered material if it:
Substantially deprives the aggrieved party of the benefit they reasonably expected from the contract.
Causes or is likely to cause significant harm to the aggrieved party.
Involves a major failure to perform a term that is an essential element of the agreement.
The cumulative effect of multiple minor breaches may also be considered material if they significantly undermine the agreement.
Minor Breach
A minor breach, also known as a partial breach, occurs when one party fails to perform a small part of the contract but doesn’t deprive the other party of the contract’s main benefit. In such cases, the aggrieved party may still be required to perform their obligations under the contract but may seek damages for the breach.
Anticipatory Breach
An anticipatory breach occurs when one party indicates, before the performance is due, that they won’t fulfill their obligations under the contract. This can be through a direct statement or actions that make performance impossible. The non-breaching party may treat the contract as breached and seek remedies immediately.
Remedies for Breach of Contract
When a breach of contract occurs, the non-breaching party may seek various remedies to address the harm caused. These remedies are generally categorized into monetary damages and equitable remedies.
Monetary damages include:
Compensatory damages: These damages are intended to compensate the non-breaching party for the actual loss suffered due to the breach. They aim to put the injured party in the position they would have been in had the contract been properly performed.
Consequential damages: Also known as special damages, these are damages that result from the breach but aren’t directly caused by it. They cover losses that were foreseeable at the time the contract was made.
Liquidated damages: Some contracts include a clause specifying a predetermined amount of damages in case of a breach. These clauses are enforceable if the amount is a reasonable estimate of the anticipated harm and not considered a penalty.
Punitive damages: These damages are awarded to punish the breaching party for egregious conduct and to deter similar behavior. They’re rarely awarded in breach of contract cases unless the breach involves fraudulent or malicious conduct.
Quantum meruit: This principle allows a party to recover the value of work performed when a contract exists but is unenforceable or has been breached. It focuses on the fair value of services or goods provided.
Equitable remedies include:
Specific performance: This remedy compels the breaching party to perform their obligations under the contract. It’s typically used when monetary damages are inadequate, such as in cases involving unique items or real estate.
Rescission: Rescission cancels the contract and restores the parties to their original positions before the contract was made. It’s available when there is a material breach, fraud, or mutual mistake.
Reformation: This remedy allows the court to modify the terms of the contract to reflect the true intentions of the parties, especially where there are errors or omissions.
A civil litigation attorney can help find appropriate remedies that leave both parties satisfied.
Statute of Limitations for Breach of Contract in Maryland
In Maryland, the statute of limitations for filing a breach of contract lawsuit is generally three years from the date the breach occurred. This applies to oral contracts and most written contracts unless another statute provides otherwise. If the contract is under seal, the limitations period extends to 12 years.
The clock typically starts when the breach is discovered or reasonably should have been discovered. If a party conceals the breach or the injured party couldn’t have known about it earlier, the discovery rule may extend the filing period.
It’s essential to act quickly. Waiting too long may forfeit your right to pursue legal remedies altogether.
Common Examples of Contract Breaches
Here are a few examples of how breaches of contract commonly occur in Maryland:
Construction Contracts
A contractor fails to complete work by the agreed deadline or uses inferior materials. If the work is left unfinished or the defects are substantial, it may constitute a material breach.
Commercial Lease Agreements
A tenant stops paying rent or abandons the property before the lease term ends. The landlord may sue for the unpaid rent, damages for lost income, or specific performance of lease terms.
Employment Contracts
An employee violates a non-compete or confidentiality clause. If the violation harms the employer’s business interests, legal action may follow.
Sales Agreements
A supplier fails to deliver goods on time, or the goods are defective. If the delay or defect significantly impacts the buyer’s business, it may give rise to a claim for breach.
How Maryland Courts Determine If a Breach Has Occurred
To establish a breach of contract claim in court, the following elements must be proven:
A valid and enforceable contract existed.
The plaintiff performed their contractual obligations.
The defendant failed to perform their obligations.
The plaintiff suffered damages as a result of the breach.
Courts will consider the nature of the breach, the contract’s language, and any communications between the parties. Defenses to breach may include:
Impossibility of performance
Fraud or misrepresentation
Mutual mistake
Duress or coercion
Lack of capacity to contract
Working with a qualified civil litigation attorney is critical to form a solid defense.
Best Practices for Avoiding a Breach
To prevent contract disputes and breaches, follow these best practices:
Use Clear and Comprehensive Contracts
Make sure all terms are clearly defined, including deadlines, payment obligations, and conditions for termination. Ambiguities in contract language often lead to disputes.
Maintain Open Communication
Consistent communication between parties helps resolve issues before they escalate into breaches. Address potential problems early.
Document Everything
Keep records of all correspondence, performance milestones, payments, and notices. These can serve as vital evidence in case of a dispute.
Consult an Attorney
Legal advice during contract drafting, negotiation, and enforcement helps prevent costly mistakes. An experienced attorney will make sure your rights are protected.
What to Do If You’re Accused of a Breach
If someone accuses you of breaching a contract:
Review the contract thoroughly.
Gather all related documentation.
Consider whether the other party has also fulfilled their obligations.
Respond promptly and professionally.
Seek legal advice before making any statements or admissions.
In some cases, disputes can be resolved through negotiation or mediation without going to court.
Contact an Experienced Civil Litigation Attorney
If you suspect a contract has been breached, or if you’re facing allegations of breach, act promptly. Early legal advice can often prevent a bad situation from getting worse.
Located in Clinton, Maryland, William Ray Ford Attorney is here to help individuals and businesses in Calvert County, Prince George’s County, Anne Arundel, Montgomery County, Howard County, Frederick County, and Queen Anne’s County. Contact my firm today for experienced legal counsel.