Breach of contract

Lore & Background

There exist two elementary forms of breach of contract. The first is actual failure to perform the contract as and when specified. A further form of breach of contract is conduct indicating an unwillingness or inability to perform an obligation arising from that contract.

These forms overlap, and an actual failure to perform may manifest an unwillingness or inability to perform. The first type is an actual breach of contract. The two other types are breaches as to the future performance of the contract and are technically known as renunciatory breaches, more commonly known as anticipatory breach.

The general law has three categories of breaches of contract, which measure the seriousness of the breach: breach of warranty, breach of condition, or breach of an innominate term (intermediate term). Any breach of contract is of one of these categories. A term of a contract is an innominate term unless it is clear that it is intended to be a condition or a warranty.

Reader's Guide

Any breach of contract gives rise to a right in the hands of the innocent party to recover damages caused by the breach. Damages in the UK are the only remedy available for breach of a warranty. Damages are classified as compensatory or punitive.

Compensatory damages attempt to place the innocent party in the position that would have been occupied 'but for' the breach. Punitive damages are given to punish a wrongdoer who has acted willfully, maliciously or fraudulently, and are awarded only in extreme cases. A right to terminate a contract arises for: breach of a condition (no matter how trivial); repudiatory breach (actual breach of an innominate term where the consequence is sufficiently serious); or renunciatory breach (anticipatory breach) where the other party makes clear it will not perform at all, or will commit a breach of a condition, or will commit a breach of an innominate term with serious consequences. To terminate for repudiatory breach, the innocent party must tell the defaulting party.

Conduct is repudiatory if it deprives the innocent party of substantially the whole of the benefit intended. Conduct is renunciatory if it shows an intention to commit a repudiatory breach. In the event of a renunciatory breach, the innocent party may choose to accept the breach at once and terminate, or wait for the time for performance.

Did You Know?

• Damages for distress or disappointment are not generally allowed by the courts, but cases where such damages have been considered and agreed include Jarvis v Swans Tours Ltd (1972) and Farley v Skinner (2001).
• The classifications of breach describe how a contract can be breached, not how serious the breach is; a judge decides based on the claims of both parties.