Breach of Contract

What is a breach of contract?

A breach of contract happens when one party fails to do what they agreed to do under the terms of a legally binding contract. This could mean not performing a service, delivering faulty goods, missing a deadline, or refusing to pay.

Contracts establish the obligations, rights, and remedies available to each party. When someone breaks those terms, the other party may be entitled to claim compensation or, in some cases, walk away from the agreement altogether.

Breach of contract disputes arise frequently between businesses, between consumers and traders, and between private individuals. The consequences depend on how serious the breach is and what the contract says about remedies.

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Common types of breach

Not all breaches are equal. The law recognises different categories, and the type of breach affects what you can do about it.

• Minor breach: Sometimes called a partial breach. One party fails to meet a small part of the agreement, but the main purpose of the contract can still be fulfilled. The other party can usually claim compensation for the difference, but cannot treat the whole contract as cancelled.
• Material breach: A more serious failure that goes to the heart of what was agreed. If a supplier delivers goods that are completely different from what was ordered, this would likely count as material. The innocent party may be able to end the contract and claim damages.
• Breach of condition: Contract terms are often classified as conditions, warranties, or innominate terms. Breach of a condition, which is a fundamental term of the contract, gives the innocent party the right to terminate immediately and pursue a claim for losses.
• Anticipatory breach: This occurs when one party makes clear, before the deadline, that they will not perform their side of the bargain. The innocent party does not have to wait for the actual breach to happen. They can treat the contract as ended and seek compensation straight away.

The line between these categories is not always obvious. Courts assess breaches by examining the contract wording, the consequences of the breach, and whether the innocent party has been deprived of substantially the whole benefit they were meant to receive.

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Examples of breach

Breaches can take many forms. Some of the most common include:

• Not paying for goods or services on time, or at all
• Failing to deliver what was promised by the agreed date
• Providing work or products that are defective or not fit for purpose
• Refusing to carry out agreed obligations without a valid reason
• Breaking confidentiality terms or other specific clauses

A single late payment may be a minor issue. Repeated non-payment, or a complete failure to deliver, is more likely to be treated as serious.

Whether something counts as a breach can also depend on any exclusion or limitation clauses in the contract. These may restrict what remedies are available, though the Consumer Rights Act 2015 limits how far businesses can go in excluding their liability to consumers.

What you can do about a breach

If someone breaches a contract with you, your options depend on the nature of the breach and what you want to achieve.

For minor breaches, you may be entitled to claim damages to cover your losses. Damages are meant to put you in the position you would have been in if the contract had been performed properly. You cannot usually claim more than your actual loss. Some contracts include liquidated damages clauses that specify a predetermined sum payable on breach, though courts may refuse to enforce these if they amount to a penalty.

For more serious breaches, you may be able to end the contract and refuse to carry out your own remaining obligations. You would still be able to claim for losses you have suffered. In limited circumstances, courts may order specific performance, requiring the breaching party to fulfil their contractual obligations rather than simply paying compensation.

Before taking legal action, it is usually worth trying to resolve the dispute directly. Many contracts include dispute resolution clauses that require negotiation or mediation before court proceedings. Even without such a clause, courts expect parties to have made reasonable efforts to settle.

If you cannot reach agreement, you may need to issue a claim through the courts. For lower value disputes, the small claims track in the County Court is a relatively straightforward option. You can find information about making a court claim on GOV.UK.

For consumer disputes, you may also be able to use an ombudsman or alternative dispute resolution service, depending on the type of contract. Citizens Advice can help you understand your options if you are unsure where to start.

Time limits apply to breach of contract claims. Under the Limitation Act 1980, you generally have six years from the date of the breach to bring a claim. If the contract was executed as a deed, this extends to 12 years.

The Next Step

Now that you have read through the advice above, you might want to put it into practice. Our Contract Red Flag Checker lets you describe a contract you are about to sign and get a plain English summary of the clauses that could hurt you. Takes about 2 minutes. Try it now →