What Is A Breach Of Contract?

The purpose of this article is to give you a very basic but informative explanation of what is considered a “breach of contract.”

It may come as a surprise, but most people enter into contracts on a daily basis in the normal course of their lives. The notion of a “contract” can seem very formal, as if contracts are only entered into between businesspeople. In fact, when you drop your dry cleaning off, you have entered into a contract with the dry cleaner. Contracts do not always have to be in writing, and can arise from oral agreements. In essence, a contract is simply an exchange of promises: The customer promises to pay ten dollars, and the dry cleaner promises to clean the clothes.

So, what’s a breach of contract? According to the South Dakota Supreme Court in Bowes Construction, Inc. v. SD Dept. of Transportation, there are three things which must occur for there to be a breach. First, there has to be an enforceable promise. Second, there has to be a breach of the promise. Third, there must be resulting damages. The best way to understand this is simply to break down each element.

Is there an enforceable promise?

All this means is simply that there must be a contract before there can be a breach of contract. Having a valid contract means you have an enforceable contract. To have a contract, you have to have two parties who are capable of contracting, meaning that they are competent and legally able to contract. The parties both have to consent to the contract, which simply means that there has to be evidence that the parties intended to agree about something. The object of the agreement, e.g. what the promise concerns, must be legal. In other words, a contract which purports to make one party rob a bank is unenforceable, because the object of the agreement is illegal. Finally, there must be a mutual exchange of promises. This can be tricky, but essentially means that if one person gets nothing in return for his promise, the agreement is not enforceable.

Is there a breach of the promise?

This may sound more complicated than it really is. Here’s what it really means: did one party break a promise? If a customer comes to a dry cleaners and takes his clothes without paying, he broke his promise to pay for the service the dry cleaner offered.

Are there resulting damages?

This might be the most challenging component for a breach of contract claim. There has to be damages, or some sort of loss, that results from the breach. Imagine that you get your ticket stub from the dry cleaners, and come back in two days. You come back, but your clothes are not done. The dry cleaner gives back your clothes, and you haven’t paid yet. While the dry cleaner broke his promise, there does not seem to be any money loss that you could recover.

At the end of the day, a breach of contract is simply when one party fails to do something they were obligated to do under a contract that results in some type of loss for the other party. If you feel that someone has breached a contract with you, whether it be a business partner or someone you rent land to, it is probably wise to contact an attorney to see if you have a valid claim for a breach of contract.