Netflix is currently running a documentary miniseries ‘Pepsi, Where’s My Jet’, which follows the case of John Leonard and Todd Hoffman, who took on multi-billion dollar company Pepsico, Inc. for “breach of contract” when they failed to send him a US military grade Harrier II jump jet that he tried to ‘purchase’ by following instructions insinuated on a TV advertising campaign they were running. The claim – known as the “Pepsi Points Case”. Leonard v. Pepsico, Inc. – 210 F.3d 88 (2d Cir. 2000) – ultimately failed as the court found that Pepsi never meant to form a contractual offer with its advert for a Harrier jet in exchange for its promotional points.
Although this case is somewhat unusual due to its nature, breach of contract disputes between consumers and businesses do occur quite frequently. Being involved in any contract dispute can impact commercial relationships, hinder working practices, and cost a business time and money.
In this article, we answer some frequently asked questions about breach of contract disputes and what can be done if a breach of contract occurs.
What is a breach of contract?
A contract is normally always legally binding and typically holds weight in court. Although, it must be proved that both parties entered the contract fairly and knowingly. A breach of contract does not necessarily only apply to written contracts or agreements. A breach can be applied to a verbal, written, or implied contract term. However, it must be proved that a breach occurred. A breach of contract happens when one party breaks one of the ‘terms or conditions’ within the agreement or fails to deliver their obligations under their contract. Contract disputes can occur for various reasons, ranging from a late payment to a more serious offence where one party suffers damages or losses due to the breach.
Here are some examples of where a breach can occur, including but not limited to:
- A party’s refusal to perform their duties in a contract
- Failure to deliver goods or services of satisfactory quality, as described and fit for purpose.
- Breach of employment contract
- Being late with services without a reasonable excuse
- An individual not paying for a service or paying within the timescale specified
What are the different Breach of Contract types?
A breach of contract usually falls into four categories, minor, material, fundamental (repudiatory), and anticipatory.
- A minor breach of contract – A minor breach of contract is also referred to as a partial breach. It is a breach that is less severe than a material breach. A minor breach allows the party that has been negatively affected the right to sue for damages, but it does not necessarily harm the outcome of the overall contract.
- A material breach of contract– A material breach of contract has more severe consequences on the outcome of the contract. In a material breach of contract, the party would not have entered the contract terms if they had not agreed to or guaranteed this term. For example, if you bought a TV online but only received the remote control, that would be a material breach, and you would be entitled to take legal action.
- A fundamental breach of contract – A fundamental breach is also called a repudiatory breach of contract. The severity of this breach means the contract is terminated rather than the affected party seeking damages. For example, if an employer fails to give the required notice period to terminate employment.
- An anticipatory breach of contract – An anticipatory breach of contract is not as common as the other breach of contract types. It is when a party acknowledges that they will not be able to fulfil their side of the contract in the agreed time or way. The affected party is usually notified of the incapability hence the name anticipatory. It is, however, still possible for the affected party to take legal action.
Do I have a breach of contract case?
If you are making a breach of contract claim and are planning on taking a case to court, you will need to prove the following:
- Proof that there was a contract in place – Ideally, you need to provide the legally binding contract that was in place to prove that it had been breached.
- Proof that the other party did not perform their side of the contract substantially– This is needed to compare the contract’s actual terms and how it had been breached.
- Proof that you suffered a loss due to the other party’s actions-The affected party must prove there was a loss or damage because of the breach of the contract and requires compensation.
You will also be expected to take the necessary steps to mitigate your losses (a term to describe reducing damages in legal claims and avoiding avoidable loss) to reduce the impact of the breach of contract. You should show that your losses cannot be recovered and could not have been reasonably avoided. The other party, being accused of the breach, could argue that the affected party failed to mitigate their loss to reduce the damage done.
Expert Legal Advice
Disputes over contracts are bound to happen, and if handled poorly, disagreements over the terms of a contract can cause irreversible harm to existing relationships.
Here are a few examples of what we deal with:
- Rejected insurance claims
- Sale, distribution and/or supply agreements
- Tailored commercial contracts
- Remedies for breach of contract and restitution
- Exemption Clauses
- Illegality and Capacity
- Warranty disputes
- Disagreements over the meaning of technical terms within a contract
This is a complex area of the law and requires expert advice. Please contact a member of our team below or email email@example.com for a consultation to discuss the best way forward for you, and we will provide you with further and specific advice tailored to your circumstances.
This blog post is not intended to be taken as advice or acted upon. If you are seeking legal advice, please contact our team of solicitors.