What is Breach of Contract?

Felicia Dye

A contract is a legally binding agreement. Breach of contract can occur when a party to a contract does something that he has agreed not to do. A breach of contract can also occur when a person does not do something he has agreed to do. Such violations of an agreement are often subject to various types of legally enforceable consequences.

An employee who signs a contract that prohibits him or her from working for another company will be in breach of contract if he or she decides to work for that company, regardless.
An employee who signs a contract that prohibits him or her from working for another company will be in breach of contract if he or she decides to work for that company, regardless.

Contracts are put into place to protect the parties of an agreement. A contract generally outlines each party’s obligations. It is also common for prohibitions to be included in the terms of the agreement. Breaching a contract does not mean that a party has violated all terms of an agreement. Violating a single portion of an agreement can result in a breach of contract.

Breach of contract occurs when one party violates terms of an agreement.
Breach of contract occurs when one party violates terms of an agreement.

There are several types of breaches that can occur with regards to contracts. Some breaches are minor. A party who is a victim of a minor breach often does not have much recourse. This is because the violation may not have caused any substantial or measurable harm.

An example of a minor breach could occur if a shipping company agrees to uses foam packaging inside of boxes. An occasion may arise where foam packaging is unavailable and the shipping company uses bubble wrap. As long as the packages are delivered on time and the goods are intact, it is unlikely that any legal action can be taken. An exception would be if the opposing party has paid for the foam packaging materials at a higher rate.

In some instances there occurs a material breach of contract. A material breach generally allows legal action to be taken that may force the breaching party to act in a certain way. It may also result in the breaching party being liable for the payment of damages.

A good example of a material breach could occur when Company A hires a consultant to act on its behalf in servicing Client B. One of the terms of the contract between Company A and the consultant may be that the consultant may not directly engage in any business affairs with Client B. Although the consultant may complete all the duties required of her satisfactorily, she will be in breach of contract if she later accepts an offer to work with Client B directly. If Company A makes the discovery before the work is concluded, it may be possible to prevent completion of the work. If the work has been completed, Company A may be able to sue for amounts that it would have received if it had been party to the deal.

A fundamental breach of contract is one that is so major it can result in dissolution of the agreement. Damages may also be awarded in such cases. If a trucking company is hired to deliver salt to the Transportation Department during snow storms over a two-year period but does not deliver for the first two storms, a fundamental breach has occurred. The Transportation Department may be absolved of the obligation to accept future services and may be able to sue for damages caused by the prior missed deliveries.

A contract may stipulate that parties must abide by certain terms in order for a contract to be valid.
A contract may stipulate that parties must abide by certain terms in order for a contract to be valid.

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Discussion Comments


@anon292452: If you're in the U.S., this is illegal. It is a violation of the Fair Debt Collection Practices Act. Debt collectors can *only* speak to the person in question and cannot discuss the details with anyone else, period. It's a violation of U.S. federal law to do so. You can write a letter to the company, citing this law and telling them not to call you at work again, and to remind them that no one is to be informed about this debt but you.

If you're not in the US, then I'm not certain what laws might be applicable to this situation in your country. You might ask someone at the bank where you hold your personal checking account what the laws are where you live. Good luck.


A well known bank called my workplace and spoke to the receptionist. The receptionist told them I wasn't at work that day, and the call center consultant from the bank then told the receptionist that he was a debt collector and I owed $10,000 and to get me to call them!

I have no idea what my rights are in this problem. My manager knows also, since it was passed on to her for her to call me that they had called. I am so embarrassed at work now that they know my business.


There were two payday loans deposited into my account. My balance never seemed unusual because the bank had taken the funds deposited from the lenders to cover a direct deposit advance I had taken my last pay period for about the same amount.

The payments started being deducted and after a while I started getting overdraft notices and then I checked online to see that my husband had used my checking account information and gotten these 767 percent APR loans. These loans have his name on them.

He never asked me for any money or told me about this. At this time, he was suffering from a lot of headaches and went to the doctor to find out he has a cyst in his brain. I don't know if this could be why he did this, but this was out of character for him to do. We have been together for 12 years and married for almost 2. I felt I needed to explain that because most everyone feels that we are trying to pull a fast one and have something to gain.

The loans were deposited in early March. I didn't become aware of these loans until early April, when I reported everything to WF. I filed claim after claim, tried to get a line of credit to help me through this mess three times, with denials and reasons/credit scores different each time. Here is the thing: he is not on my account, never has been. He is not a signer never has been. He is not authorized to do anything in my account. I chose not to have a joint checking account because I know he does stupid things sometimes.

Yes, the loans have been paid. I am not trying to get the deposit redeposited. No, I feel the bank is in breach of contract. They allowed someone on my account who is not authorized, period. They have refused to reopen my case or even to return my calls. The $750 loans have been paid, and I am out over $600 because of this. I have sent faxes and e-mails that prove this was not me, gone into the branch and had the manager give me the runaround for the last two weeks, with promises. The one lender is willing to cooperate with them.

It's been over a month, and I was told the account was closed on the ninth and on the tenth, the bank allowed another payment to go through unauthorized. I am on the phone every day trying to get them understand he's not on my bleeping account. This has caused huge problems and it just seems to be getting worse. Sorry this is such a long story.


If a relative promised to help me get my driver's license back (by paying for all the classes and inter-lock machine, etc.) In return, he would have me to take him on his errands, and he doesn't have many.

All of this was verbal, but I had a witness in the room who discussed the whole situation with us. I wanted to make sure because it was going to cost me about $2,500. Well, he reassured me I didn't have anything to worry about. I had already been to DUI school back in 2008, so that part wasn't an issue.

In Georgia, if you have more than one DUI in a certain amount of time, you have to go through a state (DHR) assessment, which I did well in since I have been sober since July 2006.

Anyway, I took these classes through DHR and I graduated in October. Now my relative is refusing to keep his end of the bargain. I feel as if he breached our contract because I began to perform my end of the bargain and I completed the program. What can I do? I know he has the money. Patti K.


My aunt once tried to sue someone for breaching a verbal contract. Some guy had agreed to buy her house and as a result she took it off the market. When he backed out she was determined to get damages for her time, stress and the financial loss.

She consulted a breach of contract lawyer but was advised against pursuing the case. To have a chance of winning she needed independent witnesses and to prove the potential buyer and her were on the same page when the verbal offer was made.


@CaithnessCC - I hope you took it to court, as I'm sure this wouldn't be considered a breach of contract case. I totally understand why there needs to be clear rules for employment, but I'm sure some employers take advantage of people by including ridiculous clauses like yours did.


This is a really interesting subject to me because I once lost a job for supposed breach of my employment contract. The reason given was that I was seen out socially, in a romantic setting, with a colleague, which broke the rule about inter-office relationships.

The whole thing was ridiculous as I had actually bumped into the person while out with friends and simply chatted for a short while at the bar.

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