BUSINESS LAW 101

BREACH OF CONTRACT

BY ALBERT L. KELLEY

 

Breach of contract is defined as failing to act as required in the contract. This can be a failure to do an act that was agreed to be done; failing to pay money owed or doing an act that was agreed not to be done.

All terms of a contract are important. The parties must follow the terms. Any variation may be considered a breach. If the contract states an act must occur on Monday, and it is performed on Tuesday, that is a breach. Payment that is short by 1 cent is a breach.

Often the breach is committed before any action is required under the contract. This is called an anticipatory breach. An anticipatory breach may be committed by words or actions. The act or statement must clearly show that the party has no intention of carrying out their portion of the agreement. A repudiation or anticipatory breach may be corrected if the party realizes his or her error, unless the other party has changed their position because of the repudiation. If there has been an anticipatory breach, the aggrieved party generally does not have to wait until the time of performance to bring suit. Once a party has taken action to show he is not going to act, he may immediately be sued for breach of contract.

Anticipatory breaches do no always end in lawsuits. If one party calls and says she isn’t going to perform, and the other side agrees, then we have a waiver of the breach. Waivers also can occur with standard breaches of contract. A common example is when a party to a contract makes a late payment. This is a breach because the payment wasn’t made when required. If however, the late payment is accepted, there is a waiver of the breach. At that time, no suit is allowed because the breach was with permission.

At times, the breach is only to a portion of the contract, but not to the main part. In this situation, the waiver of the breach doesn’t end the contract — it just waives that portion. The rest of the contract is still in effect.

Waivers can be dangerous. If they are frequent, they can modify the contract. If you make a habit of accepting payments late, this may become a modification of the contract so that all payments may be made late. Often landlords realize this only after the defense is raised in court and they find their contracts have been modified without their knowledge. For this reason, many contracts now include a clause that one or more waivers will not be deemed to be a modification of the original agreement. You also can accept a breach, but reserve your rights to sue on the breach. This only is allowed when there has been some damage or where there should be some set-off. This can also only be done with notice to the breaching party that you are reserving the right to proceed on damages.

The language of the contract can limit what happens as a result of a breach. There may be limitations requiring notices before the breach is recognized, or opportunities to cure when a breach has occurred.

Al Kelley is a Florida business law attorney located in Key West and previously taught business law, personnel law and labor law at St. Leo University. He is so the author of “Basics of Business Law” (Absolutely Amazing e-Books). This article is being offered as a public service and is not intended to provide specific legal advice. If you have any questions about legal issues, you should confer with a licensed Florida attorney.

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