EM Law | Commercial Lawyers in Central London
A contract is a legally binding agreement between two or more parties. A contract can be made in writing or by word of mouth. Sometimes, contracts can even be made by inference from the conduct of the parties and the circumstances of the case.
There are three fundamental elements in any simple contract. These are:
If any of these elements are missing, there will be no contract.
A breach of contract occurs where a party neglects or refuses to honour a contractual obligation. A breach by one party causes a right of action to accrue to the other party. 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 if Party B fails to provide those goods and services to an acceptable standard.
Not every breach has the same consequences. A minor breach, such as a short delay, usually entitles the innocent party to damages but not a right to terminate. A material breach is more serious and may justify termination, depending on the contract terms. An anticipatory breach happens when one party makes clear, before performance is due, that it will not meet its contractual obligations. Identifying the type of breach is the first step in deciding what the injured party can do.
The principal remedy in English law for breach of contract is an award of damages i.e. money. The purpose of damages is to compensate the injured third party for loss, rather than to punish the wrongdoer. Damages should put the injured third party back in the position they would have been in had the breach never occurred.
Generally, there are no rigid rules for the quantification of damages in contract. The assessment of damages is a question of fact. There are, however, elements that must be proved in front of the court. Firstly, a claimant must establish the existence of a contract and that this contract was breached. Then, a claimant must prove factual causation; that loss was suffered as a direct consequence of the breach of contract. In addition, the rules on mitigation, legal causation, remoteness and contributory negligence may restrict, and in some cases prevent, a damages award.
Alternatively, parties may insert a ‘liquidated damages’ clause into their contract before a breach occurs. This clause will state the amount of money that will be available in the event of a breach of contract and will therefore eliminate the uncertainty of establishing a case in front of the court. Although the court will try to uphold such clauses, a ‘liquidated damages’ clause which is a ‘penalty’ will not be enforceable.
There are also other, less common remedies available in breach of contract claims. In some circumstances, the court may order that the party in breach must fulfil a particular term of a contract which they had previously failed to do. This is known as specific performance. Alternatively, 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. These remedies are equitable remedies and are only available at the discretion of the court. , Unlike in the case of case damages, equitable remedies are not awarded as of right.
Where a breach is serious enough, the innocent party may have the right to terminate the contract and seek damages for financial loss. Termination without that right can itself amount to a breach, so it is important to take advice before acting. Our breach of contract solicitors will explain the potential remedies available, including damages, specific performance and injunctions, and which is most likely to recover your financial loss from the breaching party.
Suing someone for breach of contract is not always straightforward. Before pursuing a claim you should assess the merits of your claim and consider what outcome you want. Pursuing a claim for breach of contract may not be a cost-effective response and may hamper business relations with the other party.
Before embarking on a claim, you may wish to explore methods of alternative dispute resolution. These methods may resolve the issue without the time and expense of going to court. Such methods include negotiation, mediation and early neutral evaluation.
If a claim is made against your business, we can help you defend it. We will review the contract terms, assess your legal position and look for early resolution through negotiation, mediation or other alternative dispute resolution before court proceedings are issued. Where court proceedings cannot be avoided, we will represent you through the dispute resolution process.
Our breach of contract solicitor Sasha Bark-Jones will provide advice for your case.
No. A valid contract can be made verbally or by conduct as well as in writing, provided it is legally binding. Proving the terms of an unwritten contract is harder, so gathering evidence early matters.What are the main things to think about when taking on a business lease?
Under the Limitation Act 1980, most breach of contract claims must be brought within six years of the breach, or twelve years where the contract was made by deed. Seek advice early so that the limitation period does not expire.
Not quite. Misrepresentation concerns false statements made before a contract was entered into, while breach of contract concerns a failure to perform its terms. The two often arise together in commercial disputes, and a successful misrepresentation claim may allow the contract to be rescinded as well as damages to be claimed.
Yes. We advise businesses on enforcing and defending restrictive covenants and confidentiality obligations in commercial contracts, including applying for an injunction where swift action is needed to protect your commercial interests.
