Breach of contract

How a contract can be breached

There are two main ways a party can breach a contract:

1 where a party fails to actually do what a clause states must be done by the time agreed, or if no time is provided, within a reasonable time; and

2 where a party’s conduct manifests an unwillingness or inability to perform the contract; if this occurs before the performance is due, it is considered to be an anticipatory breach.

For example, A is required to deliver a container of goods within seven days of signing a contract with B. If, a couple of days before the delivery (i.e. the performance) is due, A tells B that he has run out of those goods and will not be able to deliver them within the seven-day period, A is in anticipatory breach of the contract. Once the delivery is due, A is in actual breach of the contract.

Remedies for breach of contract

There are three main remedies for breach of contract that you can obtain from a court:

1 Damages: A breach of contract – whether it is a breach of a condition, or an intermediate term, or a warranty – entitles the wronged party to damages, regardless of whether or not the breach has caused loss. If no loss can be proven, the wronged party is still entitled to “nominal damages” (recent case law suggests that this is approximately $100).

2 Specific performance: A wronged party can seek orders from a court compelling the party who breached the contract to perform the contract. For example, if A is in breach of a contract by failing to attend settlement to transfer land to B, B can seek a court order forcing A to attend settlement and transfer the land to B.

3 Termination: A breach may entitle the wronged party to terminate the contract in the following circumstances:

where the contract provides a right to terminate in the case of such a breach;

where the breach constitutes “repudiation”, which is when a party shows an intention to no longer be bound by the contract, or to only perform it in a matter that is substantially inconsistent with their obligations;

where a party breaches a condition and fails to perform an obligation that is considered an essential term of the contract;

where a party breaches an intermediate term and fails to perform an obligation that causes substantial loss of benefit to the wronged party.

For more information about what you can do if you are seeking a remedy for a breach of contract, see Taking action as a consumer. For information about loan contracts, see Credit reporting.