What is a Breach of Contract?

In this article, we will answer the question “what is a breach of contract?” and explain when a breach of contract occurs according to Illinois contract law. We will explain when a contract is valid in Illinois and answer the question, “can I be held liable for breach of an oral contract?” Finally, we will explain the definition of an “anticipatory breach of contract” as well as a “material breach of contract.” 

What is a Breach of Contract?

Breaches of contract occur when one party does not perform according to the manner laid out in the contract, the time agreed upon in the contract, in a way that is only partially what was agreed upon or utterly different from what was agreed. 

Below are some examples of contract breaches:

• A contractor does not install the agreed-upon roof tiles on a family’s home (failure to perform in a specified manner)
• The roof tiles are not done in the agreed-upon time frame (failure to perform according to the specified time)
• The roof tiles are incorrect, which results in leaks in the roof and flooding in the family’s home (delivering partial results)
• After the agreement is made, the family decides they cannot afford to pay the agreed-upon price (failure to perform in a specified manner)

What are the Elements of a Breach of Contract Claim?

Although a breach of contract occurs when one party fails to perform under the agreement, all of the following elements must be true for the other party to be able to maintain a breach of contract claim in court:

• A breach of contract by the defendant;
• The contract must be valid (For more on this, check out our article: “What is Needed For a Contract to Be Legally Binding?”);
• The injured party had to have fulfilled its end of the contract; and
• The injured party must have suffered economic damages as a result of the breach.

Bear in mind that even if all of these elements are true, the injured party will not be able to recover if the breaching party has a valid defense to breach of contract claims (For more, check out our article on the topic: Illinois Defenses to Breach of Contract Explained).

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When is a Contract Valid?

As a threshold issue, one won’t be held accountable for breaching a contract that was not valid in the first place. A contract requires the following elements in order to be valid:

• Offer: The promise to act in exchange for something, the initial promise that the contract is upholding.
• Acceptance: The agreement to the terms of the contract.
• Consideration: The value that is provided to each party involved in the contract.
• Intention to create legal relations: The understanding that the contract is being upheld by someone outside of the two parties involved, who will deal with failures to uphold the contract or cancellations of the contract.
• Capacity to contract Both parties who sign the contract has the legal capacity to do so.

More on this: What is Needed For a Contract to Be Legally Binding?

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Can I be Held Liable for Breach of an Oral Contract?

You may recall from our previous article, “What is Needed For a Contract to Be Legally Binding?” that a contract can be either written or oral. An oral contract is acceptable in most cases except those involving property, certain debts, the money of a certain amount, or contracts that will be taking place for longer than one year. Oral contracts can be breached in the same manner as written contracts, although breaches of an oral contract tend to be more challenging to prove than breaches of a written contract. 

What is an Anticipatory Breach of Contract?

An actual breach of contract occurs when one party does not deliver on their side of the bargain once the due date for performance arrives. An anticipatory breach is an action that demonstrates that one party is planning on failing in the future to uphold their end of the contract and will not complete their contractual obligations. An anticipatory breach of contract by one party the contract relieves the other party of the duty to perform and may lead to liability in the same way as an actual breach, depending on the circumstances. This is also known as a repudiatory breach of contract.

What is a Material Breach of Contract?

A material breach of contract is a breach that substantially defeats the benefit that the other party expected to receive from the contract. A material breach by one party will relieve the other party of the obligation to perform their end of the deal. A minor breach of contract occurred when some part of the contract was not fulfilled, such as the due date for delivery, but the other party still received a substantial benefit. In these cases, the other party is still required to perform their end of the contract, but the party that breached may be required to pay damages in order to put the non-breaching party in as good of a position as they would have been in had the minor breach not occurred.

Considerations in Breach of Contract Cases

When hearing a breach of contract case, courts will consider to what extent one party missed out on the benefits that were expected, the extent to which that party can be compensated, what type of breach occurred, and whether there was a legal reason for the breach. A court may also determine whether it is likely that the contract will be fulfilled if the party is given another chance to act accordingly.

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