Breach of Contract Explained

A breach of contract happens when one of the parties fails to fulfil obligations under the employment contract. Contracts are a crucial part of business dealings in Australia. They clearly outline the expectations of both parties and provide a legal framework for the transaction. However, despite the best intentions, one of the parties occasionally may not uphold their obligations under the contract.

The threshold for whether or not a party intends to breach their obligations is quite high in Australia. Australian courts have ruled the test to be whether the conduct of a party is such to convey to a reasonable person in their situation. This article will discuss the basics of contract breach in Australia.

What Is a Breach of Contract?                            

When one party accepts the other’s offer, a written contract is created, and from that point on, both sides are required by law to follow the terms of the deal. It is only possible to modify the terms of the contract if all parties involved agree with the amendments. If a party fails to carry out their obligations, they will be in “breach of contract,”. In this instance, the injured party may be allowed to end the agreement and/or receive payment for the breach.

A contract is broken when one of the parties doesn’t do what they agreed to do. The consequences will depend on how bad the alleged breach was and what the contract says. If one party breaks a legally binding agreement in a certain way, the other party has the right to end the contract immediately and sue for damages. In different situations, the innocent party doesn’t have the right to terminate the contract but can sue for damages.

Instances of Breach of Contract

Here are some examples of contract violations:

1. Non-payment of services. This is an occurrence when a party fails to pay for services rendered. To illustrate, if a company fails to pay an independent contractor for work done, it violates the agreed-upon terms.
2. Non-delivery of goods. Failure to deliver the goods as agreed in the contract breaches the agreement. For example, if you order goods from a company and they fail to deliver the items on the agreed date, it violates the contract.
3. Misrepresentation. If a party misrepresents facts that influenced the other party to enter into the contract, it is a breach of contract. For instance, if a seller misrepresents the quality of goods sold, it violates the contract.
4. Failure to perform services as agreed. When a party fails to perform services as acceded in the contract, contractual breach occurs. Let’s say, you hired a contractor to renovate your house but they failed to complete the work as per the agreed timeline. Such failure violates the terms of the contract.
5. Breach of confidentiality. If a party breaches or an employee breaches the confidentiality clause or an express or implied term in the contract, it is a violation of the agreement. An example would be an employee who shares confidential information with a competitor. In this case, the employer-employee contract as to confidentiality is breached.

Types of Breach of Contract 

There are two main types of contractual breaches in Australia:

• Minor breach – A minor breach is often insignificant, such as failing to fulfil a minor contractual provision. However, the remainder of the contract may be continued without changing the contract’s purpose.

To give you an idea, here is a scenario. You just purchased an oven from a store. They gave you the oven, but there was no instruction manual. This isn’t such a big deal. The contract’s primary purpose was to deliver you an oven, which you eventually received. Although you can compel the store to give you an instruction manual, you will still have to pay for the oven.

• Material breach – A material breach, also known as a fundamental breach, is a significant break that strikes at the heart of the contract. A major breach occurs when the parties cannot fulfil the contract’s purpose as a result of the breach. A significant breach is typically defined as a failure to perform an agreed-upon essential and fundamental feature of the contract.

Take, for example, a contract for the sale of goods. Let’s say you purchase 500 bicycles from a company. When the delivery comes, they give you 500 bikes that don’t have wheels. This is likely to be a major breach.

Remedies for a Breach of Contract

In the event of a contract violation, the non-breaching party may pursue remedies, including compensation for losses incurred, specific performance, or injunctions. These are the available remedies:

1. Damages. This is the most common remedy for an allged breach of contract. It is a monetary award meant to compensate the aggrieved party for the loss suffered due to the breach. Damages can be general or special depending on the nature and extent of the loss sustained.
2. Specific Performance. Specific performance is a remedy that requires the party in breach to perform their contractual obligation under the contract as agreed. This remedy is usually sought when damages are not an adequate remedy or when the subject matter of the contract is unique.
3. Injunctions. An injunction is a court order that forbids the party in breach from taking a specific action or requires them to take a certain action. Injunctions are usually sought when damages are not adequate and specific performance is not appropriate.
4. Rescission. Rescission is a remedy that cancels the contract and returns the parties to their pre-contractual position. This remedy is typically requested when one party enters a contract due to fraud, misrepresentation, or error.
5. Rectification. Rectification is a remedy that corrects a mistake in the contract. This remedy is usually sought when the contract does not reflect the parties’ true intentions.

Any commercial transaction can suffer from the effects of a breach of contract. Thus, it is essential to understand how it occurs and what its consequences are. It is always advisable to consult with a lawyer. If you think a contractual breach has taken place, the legal process can be complex and time-consuming.

How Can JB Solicitors Help With Contract Law?

A breach of contract can be overwhelming, and seeking legal advice from a contract lawyer is essential to protect your rights and interests. The skilled contract lawyers at JB Solicitors can help you understand the breach, determine the legal remedies available, and protect you from making costly mistakes.

We can ensure that all legal proceedings following contract breaches run smoothly and with ease. Contact us now if a breach of contract occurs or an anticipatory breach occurred.