Ideally, every contract would be fair and unambiguous with the bargain fulfilled. Unfortunately, things happen—fairly or unfairly—which may result in a breach of contract.

What is a Breach of Contract?

A “breach of contract” is one or more parties failing to perform according to the agreed-upon terms. When you negotiate a contract, each party offers to do something in exchange for a benefit, which is called “consideration.” A breach may happen when one party fails to do something, fails to do it in the time specified, or fails to perform in the manner specified.

For example, in a publishing contract, an author agrees to create or edit a book in exchange for benefits like earning royalties on sales of the book by a publisher who agrees to publish, market and publicize the book. If the publisher fails to pay the agreed-upon royalties, that could be a breach of contract.

As another example, suppose a production company is entitled to a percentage of the revenue from a “wide theatrical release” of a movie; and that movie is simultaneously released in 1,500 theaters, and on a subscription streaming service (where a subscriber may watch the movie at home instead of in a movie theater). One side may argue that the “wide theatrical release” contract term is met by movie appearing in 1,500 theaters, but the other side may argue that the industry custom and understanding of “wide theatrical release” also means that the movie is exclusively in theaters for a certain period of time. Here, a breach of a contract term may be alleged, but with that term subject to different interpretations, whether there is a breach would depend on whose interpretation wins out in court. It is important to draft a contract carefully, and then read the contract language carefully when a possible breach arises.

Damages for Breach

In many business contracts, the remedy (solution) for breach of contract is built into the contract itself. For example, some contracts contain a liquidated damages clause that sets forth a specific monetary remedy for the non-breaching party in the event of a breach. The liquidated damages must be reasonable where, at the time of contract, the amount of actual damages from such a breach was difficult to ascertain. What should I do if my contract was breached?

To prove that your contract was breached, you'll need to prove that there was a valid contract (where there has been an offer, acceptance, and consideration), one or more parties failed to perform, and you suffered damages as a result. The parties may choose to start by informally discussing the problem and trying to find a mutually agreeable solution. For example, in the publishing example above, the publisher may ask to revise the schedule for the royalties. If everyone agrees, then the dispute has been amicably resolved.

If not, and the damages significant, you may want to pursue legal redress. An attorney can help you review the contract and determine what remedies to seek. Typical contract remedies include specific performance (forcing a party to do what was agreed upon), damages (monetary compensation for the breach), or rescission and restitution (canceling the contract and returning each party to their pre-contract state).

If there has been a material breach, where the other side has failed to perform or comply with an essential term of the contract, it may excuse your further performance under that materially breached contract. But not if a court later determines that the breach was immaterial. In any event, damages may be recoverable regardless of whether the breach was material.

To determine whether there has been a breach of contract and what you should do next, it would be wise to discuss your case with a seasoned commercial attorney. Reach out to Thomas P. Howard, LLC for legal advice today.