When you enter into a contract with another party, you both agree to fulfil certain obligations. If one party fails to meet these obligations, it’s a contract breach. Understanding breach of contract – what it is, the different types, and what you can do about it – is important for anyone who often works with contracts.
At Professional Saver, we’ve spent 40 years helping professionals protect themselves from different risks, including contract issues. Our team of insurance experts can offer cover that suits your work and needs. With insurance starting from £54 a year and monthly payment options for policies over £125, we make it easy and affordable to stay protected.
What Exactly Is a Breach of Contract?
A breach of contract occurs when one party fails to perform their duties as specified in the terms of a legally binding contract. This failure can take various forms. For example, missing deadlines, delivering substandard work, or failing to pay for services rendered.
For a breach to be legally recognised, the contract itself must be valid. This means it must contain:
- An offer and acceptance
- Consideration (something of value exchanged)
- The intention to create legal relations
- Certainty of terms
- The capacity of parties to enter into the contract
What Are the Different Types of Contract Breaches?
Not all breaches are created equal. The law recognises several distinct types, each with its implications and potential remedies.
Material Breach
A material breach of contract is serious. It affects the core purpose of the contract. When this happens, the other party doesn’t have to continue with their side of the deal. They can also claim compensation.
Example: A client hires you to design a website for a seasonal campaign. The website must launch by a set date. You deliver it three weeks late and the client misses their campaign window.
Minor Breach (Partial Breach)
A minor breach of contract happens when one part of the contract isn’t done properly. However, this breach doesn’t fundamentally undermine the entire agreement. Therefore, the contract stays in place. The other party must still do their part, but can ask for compensation if they lose out.
Example: You agree to write a 10-page report. You send 9 pages, but all the key info is there.
Anticipatory Breach
An anticipatory breach happens when one side shows they won’t meet their contract duties before the due date. The other side can treat the contract as already broken.
Example: A client tells you a month before the deadline that they won’t pay because they’ve found someone cheaper.
Comparison of Different Types of Breaches
| Type of Breach | Definition | Remedies Available | Impact on Contractual Obligations |
| Material | Fundamental failure that defeats the purpose of the contract | Damages, specific performance, termination of contract | Non-breaching party is relieved of its obligations |
| Minor | Some aspect of the contract wasn’t performed, but the core purpose remains intact | Damages for actual losses | Both parties must continue to perform their obligations |
| Anticipatory | Clear indication that a party will not fulfil future obligations | Damages, specific performance, termination of contract | Non-breaching party can treat the contract as breached immediately |
What Remedies Are Available When a Contract Is Breached?
If you find yourself on the receiving end of a breach of contract, several potential remedies are available:
Damages
Monetary compensation is the most common remedy for breach of contract. Several types of damages might be awarded:
- Compensatory damages – Money to compensate the non-breaching party for their actual losses.
- Consequential damages – Compensation for indirect losses that were reasonably foreseeable.
- Liquidated damages – A specific amount agreed upon in the contract in case of a breach.
- Nominal damages – A small sum awarded when a breach occurred but no actual financial loss was suffered.
Specific Performance
In certain circumstances, the court may order the breaching party to fulfil their contractual obligations, particularly when monetary damages would be inadequate. This is more common in contracts involving unique goods or services.
Cancellation and Restitution
The non-breaching party may cancel the contract and be released from their obligations. They may also seek restitution, which aims to restore them to the position they were in before the contract was formed.
How Can You Prevent Contract Breaches?
Prevention is always better than cure. Here are some effective strategies to minimise the risk of contract breaches:
- Draft thorough contracts that explicitly outline all obligations, deadlines, and consequences for non-performance.
- Include dispute resolution clauses that specify how disagreements will be handled.
- Regularly communicate with the other party about progress and potential challenges.
- Document all communications related to the contract.
- Conduct thorough due diligence before entering into contracts with new parties.
- Consider including force majeure clauses to address unforeseeable circumstances.
Can Insurance Protect Against Contract Breaches?
Insurance can help protect you if a client claims you’ve breached the contract, especially due to a mistake or not delivering what you promised. Professional indemnity insurance can cover legal costs, compensation you’re ordered to pay, and the cost of fixing the issue.
Professional Saver offers professional indemnity insurance built for advisors, consultants, designers, freelancers, and other professionals. We provide up to £1 million in indemnity cover and can tailor your policy to suit your work and risks.
When Should You Seek Legal Advice?
Consult with a solicitor who specialises in contract law if you’re dealing with a significant breach of contract. This is particularly important in cases involving:
- High-value contracts
- Complex terms or conditions
- Situations where significant damages could be claimed
- Disputes that could affect your professional reputation
How Professional Saver Can Help
Dealing with contract breaches can be tough, but the right insurance can make a big difference. At Professional Saver, we offer professional indemnity insurance to help protect you if someone claims you made a mistake or didn’t deliver as agreed.
Our policies start at just £54 a year, with monthly payments available for policies over £125. With decades of experience, we understand the risks professionals face in different industries.
To protect your business from the cost of contract issues, get a quote for a policy that fits your needs.
