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What are the different classes of breach of contract?

On Behalf of | Feb 8, 2022 | Contracts

As a business owner in Michigan, you often enter contracts with other businesses for supplies or services. Although you don’t expect it to happen, a breach in the contract is always a possibility. Here is what you need to know about the different types of breaches.

Four breach of contract classifications

Business litigation recognizes four main categories for breach of contract. These are:

• Material breach of contract, when one party receives significantly less benefit or a different result

• Minor breach of contract, where goods or services were delivered, but some part of an obligation remain unfulfilled

• Anticipatory breach of contract, where a breach has not occurred, but one party has indicated an inability to fulfill obligations

• Actual breach of contract, when a breach has occurred because one party has refused to fulfill obligations

Fortunately, if you are a victim of a breach of contract, you can pursue remedies. These include compensatory damages to address direct economic losses and consequential losses, which are indirect losses that go beyond the contract’s value.

Protecting your company from a breach of contract

Avoiding all breaches of contract is virtually impossible over the lifetime of your business. Nevertheless, you can mitigate your risks by analyzing past business contracts to see what worked well and what did not. Incorporating language that lessens the possibility of a breach will help reduce your risk.

However, even the best of intentions cannot always prevent a breach of contract from occurring. Actively following the performance of the contract and ensuring that all involved parties know their responsibility can help identify potential problems before they occur. If you want to significantly reduce the chance of mistakes occurring, establish a monitoring plan that includes regular notifications along with easy access to all of your active contracts.

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