Breach of Contract​

A contract is formed between parties when the following elements have been fulfilled.

• There is consideration by both parties to enter a transaction or relationship
• An offer is made by one party
• The offer is accepted by another party
• The intention is made to create legal relations
• The terms of the transaction or relationship is outlined by both parties

A contract can be in writing such as a written contract, verbal where parties agree to terms or it can be implied based on the conduct of the parties involved.

Where there is no written contract, as it may happen with builders or certain tradesman, we can use implied terms and use the exchange between the parties in the form of emails, text messages or letters as evidence of the agreement and obligations.

When contract disputes occur and they cannot be resolved, you may have to resort to law to enforce the terms of the agreement or seek damages for breach of implied or express terms of the contract. We work with clients in identifying what is possible if the contract was never formalised in writing.

It is considered by law that an agreement is formed when one party communicates an offer to another party, who openly offer an acceptance of that offer by communication.

If there is a lack of evidence showing an offer by one party, and an acceptance by the other party, the courts do offer flexibility in looking at evidence which can be used to prove there was indeed a contract. This can be implied terms or if parties are openly working on agreed terms.

If a contract has been formed in writing, then the courts will want to see a signed contract by both parties to consider it a binding contract unless there are certain circumstances.

If one party kept delaying the signing of the contract, but the agreed terms were being followed, then it can be argued that the contract is binding. The intention of the parties involved can also be used to prove that the contract was binding.

Express terms in a contract are those terms that have been clearly expressed by the parties involved. The terms can be expressed either in writing or verbally.

The Implied terms of a contract are terms that have not been expressly agreed by the parties. However, these terms are implied by the court on the basis of:

• Usage or custom
• The parties’ previous dealings
• The intention of the parties
• Common law
• Statute

We covered an example in our blog post about breach of contracts, which you can read as follows.

Person A, an author by profession, signed a contract with a publishing house to publish their new book. The contract outlined the standard clauses, whereby the publishing house controls title, layout, design, images, publication date and marketing, while the author retains copyright and will get payment for publication and sales of the book.

Once the book was published, Person A received an initial sum as outlined by the contract, but did not receive any further payments. The contract contained the following clauses.

x.1) The sum of £1,000 (one thousand pounds) in advance and on account of any sums which may become due to the Author under this agreement, payable in the following manner:

x.1.1) £1,000 (one thousand pounds) on completion of this agreement.

x.2) except as otherwise provided in this clause 8.1:

x.2.1) on hardback print units 1 to 1,000 (the first unit sold to the one thousandth), 10 per cent of the net amounts received by the Publisher as a result of the exploitation of the Work

Further, the contract stated:

x.1) to supply to the Author statements in respect of the net amounts received by the Publisher, together with payment of any sum due to the Author, within 90 days of the end of each Account Period

Person A received statements after the first account period was over, but did not receive any sum. The reason outlined to Person A was a change in circumstances, which is a reason for a breach of contract.

Yes, there are categories in which a contractual dispute can fall under. These are discussed below.

A minor breach occurs when a party fails to perform or abide by a minor part of a contract. This is known as a minor or partial breach because the failure is so small that the parties can still continue to abide by their contract. 

A material breach occurs when there is a fundamental breakdown in the agreement. This happens when a party fails to fulfil an important part of the contract or creates a situation which makes it impossible for the matter to carry on as normal. This might occur if the publishing house fails to credit an author as the copyright owner of the published work.

A fundamental breach or repudiatory breach occurs when the breach is so severe that the contract can be terminated as a result of the act. This might occur if an author refuses to give the publisher their book for review and publication.

An anticipatory breach occurs when a party expressly states that they will not be carrying out a term or condition of the contract. Citing the example above, if the publisher states that they will not be publishing and promoting the book, then it would amount to an anticipatory breach.

• Repudiation – If a contract is breached, the affected party has the ability to terminate the contract by ‘repudiation’. They can also claim compensation for the loss they have suffered as a result of the breach.
• Damages – There are used to put the affected party back in the position they would have been in if the terms of the contract had been met as outlined. There are two types of damages.
  • Special damages, which are awarded for quantifiable losses, such as loss of income or profits;
  • General damages, which cover unquantifiable losses such as loss amenity.

Any dispute under £10,000 comes within the ambit of the small claims court. It is called small claim as it encourages people to conduct the litigation themselves and to encourage and facilitate that rules are designed so that even if you succeed in proving breach of contract (win) you will not recover your legal costs in full.

Limitation also applies to contractual disputes and its six years from the date of the breach.