Top 10 FAQs on the Breach of Contract

Breaching a contract is as easy as making a contract.

Make sure you understand what are the elements for a breach of contract, what it entails and how to protect yourself by reading our Top 10 FAQs on the Breach of Contract.

The importance of contracts in our everyday lives is often overlooked. Contract law regulates many aspects of your life and is engaged whether you are making an online purchase or filling your tank at the petrol station. Contracts are therefore the cornerstone of the commercial world.

This article will answer the top ten most frequently asked questions (FAQs) on breach of contract.  

Before you read on about the breach of contract, make sure you fully protect yourself with some Useful Tips for a Legally Binding and Enforceable Contract.

Top 10 FAQs on the Breach of Contract

1. What is a breach of contract?

A breach of a contract occurs when a party to a contract fails to do what they have agreed to do under the contract. The breach of contract can take place when a party fails to fully or partially fulfil its obligations. 

For example, in a contract for services, a contractor failing to provide their services as stipulated in the contract, or a client failing to pay due remuneration to the contractor may constitute a breach of contract. Explore DocPro’s database of contracts for services here.

Contractual breaches can take the form of minor or material breaches, and anticipatory and repudiatory breaches. Read on to find out what they are and the consequences of each type of breach of contract.

2. How to prove a breach of contract?

When dealing with matters revolving around a contract, it is imperative to look to the contract itself for answers i.e. review the contractual terms in your agreement.

It is important to identify that you have satisfied your contractual obligations, and prove that the other party did not perform their obligations under the contract terms. In doing so, it is useful to point to and highlight the specific contract term that the other party breached and show that the other party’s actions did not conform to those stipulated in the contractual terms.

If a party’s breach of contract has resulted in any damages, which can include any lost money, time or expenses on your end, it may also be relevant to show this and clearly establish the link.

3. What are the consequences of breach of contract?

After a breach of contract has been established, it is useful to turn to the different consequences of a breach of contract. This varies according to the different types of breach.

• Breach of minor term

A breach of a minor term, such as a warranty, is a breach of contract that is not essential to the performance or functioning of the contract. In such circumstances, the innocent party may only claim for damages and cannot be considered discharged from their contractual obligations.

• Breach of major term

A breach of a major term, or condition of the contract, entitles the innocent party to not only cease performing their contractual obligations, but also claim damages suffered due to the breach of contract.  

• Breach of innominate term

An innominate term (or an intermediate-term) is neither major nor minor enough to be a condition or a warranty. Depending on the details of the breach itself, the innocent party may be discharged from the contract.

The specific details about the consequences of a breach of contract may often be contained in the wording and contractual terms of your agreement. Read more about Contract Terms – Important Boilerplate Language in an Agreement. For example, in a limitation of liability clause, the amount of damages to be paid to another party because of a breach of contract is capped. A warranty provided in a contract may also stipulate the remedies that are available if there is a breach of the warranty. Of course, the termination clause of the contract will usually provide specific circumstances which allow parties to end the contract. Often, breach of contract is a major reason allowing for termination of the contract.  Find out more about your Rights of Termination for Breach of Contract.

4. What is my liability for breach of contract? Will I always be liable if I breach a contract?

This may depend on the construction of the contract.

For instance, if a contract contains an exemption clause, it may limit or exclude liability in the event of a breach of contract for a party. Consequently, depending on how the exemption clause is constructed, your liability in the event of a breach of contract may also vary. Furthermore, some exemption clauses are ineffective and regulated by local legislation. For instance, in Hong Kong, the Control of Exemption Clauses Ordinance (Cap. 71) regulates exemption clauses and prohibits exemption clauses for death and personal injury. Exemption clauses are also governed by common law rules. Therefore, whether you will be liable for the breach of contract depends on the construction of exemption clauses, and the validity of the exemption clause itself.

5. What if the agreement was not a valid contract?

Parties can only be legally bound by contractual terms if the contract was valid in the first place. Understand the 6 Essential Elements of a Valid Contract (with Examples).

If the contract in question was not a valid contract, the contract would have the same effect as a void contract and the contract would not be enforceable in the first place. Therefore, a proper breach of contract and the necessary consequences that entail must arise from a valid contract.

6. What if my contract was not in writing? Can I sue for breach of verbal contract?

A breach of contract can happen in both a written and oral contract. Contracts can be oral or written agreements. It is challenging to enforce an oral contract since the entirety of the agreement, from discussion of terms to confirmation, was crafted verbally. Therefore, besides the parties present during the contracting process, it is difficult for third parties to find out the specific terms which were agreed to.

A verbal contract does not mean you cannot make a claim for the breach of verbal contract. However, in the event that a dispute does arise over the contractual terms that are breached, it may be significantly more advantageous if your agreement was formalised with a written contract.

7. What happens if there is a breach of contract? Are you required to go to court if you breach a contract?

If a contract is legally binding, according to the aforementioned criteria, if taken to court, it will hold weight. Often, parties take matters regarding breaches of contract to court so that damages may be legally enforced against the other party. The court will evaluate the breach and the contract and duly award compensation. Often, the venue for a breach of contract lawsuit is a civil court with legal authority, in a jurisdiction that is specified in the contract itself.  

However, this does not mean you will always have to go to court in all cases of breach of contract. Often, parties may resolve the issue among themselves if this is provided in the contract. This is usually contained in a dispute resolution clause, which could detail that the parties do not file lawsuits in the event of a breach of contract, but opt for alternative dispute resolution mechanisms such as mediation or arbitration.

8. Can a contract lawyer decline to take my case?

A lawyer is under no obligation to take any case. While it may be frustrating as the client, it is not uncommon that a lawyer may decline to take your case.

This could be due to reasons such as not possessing the relevant expertise if your case is particularly complex, and the facts of the case contain much uncertainty. Or, if your case requires a significant investment of time and resources, the lawyer may feel that they cannot dedicate sufficient time and resources to another case that may pay off more in the long-term.

9. What is the deadline for filing a breach of contract claim?

This depends on the law on the statute of limitations in the relevant jurisdiction. As mentioned, this jurisdiction is usually stipulated in the jurisdiction clause of the contract.

Statutes of limitations impose time limits on how long parties have to bring a claim for a breach of contract. The clock starts from the date of the breach of contract. The time limit depends on local legislation. For example, in Hong Kong, the statute of limitations is governed by the Limitation Ordinance (Cap. 347), which stipulates that the statute of limitations is 6 years from the date of the breach of contract. Therefore, it is imperative to confirm under the relevant local legislation how much time you legally have before you must make a claim for breach of contract.

10. Who pays the attorney’s fees for a breach of contract?

The cost of a lawyer’s fees may differ depending on the jurisdiction you pursue your case in, and whether this is provided in the contract itself. For example, the contract may expressly require the losing party in the event of a dispute to pay for the other party’s lawyer fees. 

In any case, you should refer to the local laws of the jurisdiction you are seeking to bring a claim. In some jurisdictions like the United States, state statutes may require the losing party to cover the winning party’s lawyer fees. This practice is similar in other jurisdictions such as Hong Kong. In Hong Kong civil litigation cases, courts adopt a ‘Costs Follow the Event’ principle, whereby the losing party is also responsible for the winning party’s reasonably necessary legal costs, on top of their own.^[1]

Please note that this is a general summary of the position under common law and does not constitute legal advice. As the laws of each jurisdiction may be different, you may wish to consult your lawyer.

[1] Order 62 of the Rules of the High Court (Cap 4A).