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Understanding breach of contract

Contract disputes are a serious concern for many business and real estate transactions. In general, a breach of contract is the failure of one or both parties to a contract to perform promises in the contract. When a breach of contract has been claimed, the court must evaluate several considerations when determining if a contract breach occurred.

The court will consider if a valid contract existed; what obligations the parties had according to the contract; was the contract breached, was the breach material to the contract, was the contract modified, does the party in breach have a legal defense against enforcement of the contract and what damages were caused by the breach.

Remedies available in contract dispute situations depend on if the breach was considered material or minor. Generally, a contract breach is material if, because of the breach, the other party receives something that is substantially different than what was agreed to in the contract. To determine if the breach is material, the court will consider the amount of benefit received by the non-breaching party, the extent to which the breaching party has already performed, if the non-breaching party can be adequately compensated for the damages, hardship to the breaching party, the likelihood that the breaching party will perform the remainder of the contract and any negligence or willful behavior of the breaching party.

Damages and remedies vary depending on the nature of the contract breach. When the breach is considered material, the non-breaching party is not required to perform under the contract and has the right to immediately seek all remedies for breach of contract. If the breach is considered minor, the non-breaching party is required to perform under the contract but can immediately pursue all available remedies for breach of contract.

Contract disputes can be especially complex, but having knowledgeable and trained guidance through the process of enforcing a contract or against a claimed contract breach, can help the parties achieve their goals. A breach of contract can have a significant impact on a real estate or business transaction, which is why it is helpful to understand how contracts work and the remedies available when a dispute arises.

Source: University of New Mexico Judicial Information Center, "BREACH OF CONTRACT," Accessed May 28, 2017

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