What is a contract?
A contract is a promise or an agreement between two or more parties that is legally binding.
This promise can either be made expressly in writing or implied, which means it was communicated orally or by conduct.
A contract arises when an offer is made to one party, which is then accepted by another.
There must be a clear intention on both sides to be bound by the terms of the agreement.
A promise does not become a legally binding contract unless the following three elements exist:
- An agreement – which is created by the offer and acceptance of specific terms or obligations;
- An intention to create legal relations and form an agreement which is enforceable by law and;
- Consideration – where one party promises to do something in return for receiving a right, interest or benefit promised by the other party.
An everyday example of consideration in action is when money is exchanged for goods between a customer and a retailer. Consideration is what gives value and weight to the contract.
What constitutes a breach of contract?
A breach of contract occurs when one party to the agreement fails to fulfil an obligation or breaks the ‘Terms and Conditions’ as set out in that agreement.
A breach of contract can occur in various ways, for example, if Party A fails to pay for goods or services provided by Party B, or Party B fails to provide those goods and services to an acceptable standard.
How do I sue someone for breach of contract?
Suing someone for breach of contract is not always straightforward and, in order to do so, you must first overcome a series of legal hurdles to prove a breach of contract.
1. The existence of a contract
The first hurdle in proving breach of contract is to show that a legally binding agreement existed in the first place.
It is at this point that contracts formed verbally tend to become a problem when arguing breach of contract. Having no written evidence of the agreement makes it tricky to show conclusively that one existed.
In order to protect your rights and interests, it is always important to ensure that, where practicable, any contract you enter into is recorded in writing: letters and emails can be useful evidence when proving the existence of a contract.
2. That the contract was breached
Once you have shown that a legally binding contract existed, the next obstacle is to prove that an agreement has subsequently been broken and the party in breach of the agreement failed to fulfil their obligations satisfactorily. In order to do this, there must be clear evidence of what the other parties’ obligations were under the agreement, for example, the Terms and Conditions, and proof that those obligations were not performed or not performed well.
3. Loss was suffered was a direct consequence of the breach of contract
The third and final hurdle in proving breach of contract is probably the most significant and yet the most onerous to overcome.
As the injured party, you must show that, as a result of the breach, you suffered a loss and deserve to be compensated (awarded ‘damages’) for that loss. Any loss you have suffered must have been a direct consequence of the breach of contract.
It is important to be aware of what a Court will take into consideration when deciding whether damages should be awarded following a breach of contract and, if so, how much:
- Was the loss suffered caused by the breach of contract? This is a hypothetical question which asks, what position would the injured party have been in if the breach had not occurred?
- Has there been a mitigation of loss? In other words, has the injured party taken reasonable steps to attempt to reduce or limit the loss they have suffered?
- Is the damage supposedly caused by the breach too remote? This question asks whether the loss that has been suffered was reasonably foreseeable by both parties at the time the contract was made. In other words, is the loss a direct consequence of the breach of contract?
It is important to bear in mind that, even if you manage to convince the Court that you have suffered a loss as a direct result of a breach of contract, assessing and then quantifying those losses can be a complex and difficult task.
What are the legal remedies for breach of contract?
If you manage to overcome the hurdles as set out above, you may be entitled to receive monetary damages for the breach of contract. The general intention of awarding damages is to place the injured party in the same position they would have been had there not been a breach of contract.
There are also other alternative remedies which the Court may see fit to award following a breach of contract. For example, the Court may make an order for an injunction where the party in breach must either remedy the breach of contract or refrain from causing further damage.
Alternatively, the Court could make an order of specific performance whereby the party in breach must fulfil a particular term of the contract which they previously failed to do.
Should I sue for breach of contract?
When someone breaks their promise to you and disregards their legal, and sometimes moral obligations, it can leave you feeling let down, deceived and can be difficult to accept.
However, before launching into a claim for breach of contract it is important to assess the merits of your claim, evaluate how much it is worth and consider whether pursuing a claim on principle is a reasonable and cost-effective response.
Another aspect to consider is the relationships between the contracting parties. It may be that maintaining good relations between the parties, for example, local businesses who rely on each other’s good will, is a priority. If this is the case, then you may wish to explore alternative methods of negotiation before resorting to legal proceedings for a breach of contract.
Litigation can often be expensive, distressing and time consuming and may end up costing you more than you lost as a result of the breach of contract.
For more information on breach of contract contact Sadie Cuthbert here.