Terms of a contract are considered material if they are important enough that the failure to complete them defeats the very purpose of making the contract. Material elements of a contract could include the timing of completion, the amount of money to be paid, the item that is provided in sale, or the manner of performing a particular service. If any of these terms is not met, and it is so important that the contract would be meaningless otherwise, then the contract has been breached.For example, if you enter into a contract with a DJ to perform at your wedding reception, and the contract specifies that the reception is from 4:00 p.m. until 10 p.m., it would probably be a material breach if the DJ arrived at 5:00 and told you that he had to leave by 6:30. On the other hand, the court may not consider the contract to be breached if the DJ arrived at 4:15 p.m. due to a problem with traffic.
If you entered into a contract to buy a new car, and it arrived without back seat floor mats, a court would not likely consider that a material breach of the contract. The dealer may need to provide floor mats, if that was part of the agreement, but you would not be able to cancel the entire deal.;
, Substantial performance is a defense that would prevent the finding of a material breach. If either party has performed most of what was anticipated under the contract, the court will like uphold the contract. There may be some remedy to compensate for whatever portion of the contract is left unfulfilled.For example, suppose Tom agrees to whitewash Aunt Polly’s 200 foot long fence, from one end to the other, both sides, in exchange for payment of $50. Then Tom completes the job, except that he leaves about 10 feet of the inside of the fence unpainted. If Aunt Polly sues Tom for breach of contract, Tom would be able to argue that he substantially completed the job, and he would be able to collect at least some payment. He would likely have to give up whatever amount it would cost Aunt Polly to have someone else finish the job.
If a contractor agrees to perform a building job using a particular type of material, but then uses something different instead, the court will consider whether the contractor substantially performed the task required. If the two materials are of equal quality, there is probably no breach of contract.
 In order to collect on a breach of contract, you must be able to demonstrate that you have been harmed in some way. You must be able to show that, because of the other party’s material breach of the contract, you will either lose money, lose some opportunity, or suffer some other identifiable harm. In many cases, a well-written contract will include provisions that define what the damages will be if the contract is not satisfied.For example, a contract to lease an apartment for a year will usually require that the tenant make monthly payments by a certain date each month. If the tenant is late, the contract may prescribe a late fee of a specific amount as damages to be paid. If a tenant on a year-long lease leaves before the year is over, the contract will probably require that the tenant pay at least a month’s rent as damages for breaking the lease.
 Compensatory damages are, as the name suggestions, intended to compensate the injured party because of the other party’s breach. The purpose of compensatory damages is to provide the innocent party with the same amount of money the the original contract would have provided.For example, suppose Hillary enters into a contract with Donald and agrees to pay him $10,000 for legal services. Donald provides the service, but Hillary only pays $8,000. Donald would be entitled to compensatory damages of $2,000.
 Liquidated damages often apply if the contract is for a service or product for which compensatory damages are difficult to calculate. In such cases, the parties generally will consider the possibility of a breach when drafting the contract and will provide the terms of liquidated damages in the contract.Suppose Acme Company is opening a new store and contracts with Coyote Contractors to renovate the store space. Acme has an interest in opening its new store by the first of the month and has advertised special sales based on that. The contract between Acme and Coyote will specify liquidated damages of, for example, $1,000 a day for every day that Coyote is late in completing the job.
 Punitive damages are additional payments that a court can require if one party’s breach is severe or is deemed to have been intentional. The amount of punitive damages goes beyond just compensating someone for a loss. Punitive damages are rare in strictly contractual matters, but in special cases a clever attorney may be successful in arguing for them.For example, if it can be shown that one party entered into a contract and never intended to provide the service or product, a court may order payment of punitive damages as an incentive to prevent that person from repeating the breach in the future. If Professor Hill signed contracts to provide musical instruments to children, but never had any intention of doing so, he could be required to repay any money as compensatory damages and then also pay an additional penalty in the form of punitive damages. (In such a case, he may also be facing criminal charges for fraud as well.)

, In some cases, you may be able to prove that the other party committed a breach of contract, but the breach may not be something that resulted in a monetary loss. The court could find that the other party did, in fact, breach the contract, and then order payment of a nominal amount, mainly to make a point., Some contracts, particularly those for the performance of a service by a specially skilled or talented individual, cannot be satisfied simply by paying money. These require specific performance. This is an order from the court that the breaching party must provide the service identified in the contract.For example, a famous singer signs a contract to perform at a club on New Year’s Eve. The club owner sells out after advertising that the singer will be performing. The singer then decides to take the night off. The court can issue an order for specific performance and require the singer to perform. (Alternatively, the singer could be ordered to compensate the club owner for the cost of refunding all the tickets and could be ordered not to perform anywhere else on that night.)
A purchase of material is generally something that can be resolved through compensatory damages. However, if you contract to buy special marble from a particular quarry in Italy because of its high quality, and the contractor provides a different material, you could get an order of specific performance to require the contractor to get the original product.
 If the parties to a contract reach a point of agreeing that the original contract does not adequately serve their needs, then by agreement or with court involvement, they could rescind or terminate the original contract. A court is likely to order that a contract be rescinded if one party alleges that the contract has been breached, but the other party can show the that contract was entered into through some form of fraud.For example, Kevin sues Stacy for breach of contract because she has not paid him what she agreed. In court, Stacy demonstrates that Kevin lied to her about the item she was buying, so that she should not have to pay. In this case, Stacy is in breach for not paying, but the court is not going to reward Kevin for his fraudulent behavior. The court will probably rescind the contract, so neither party owes any obligation to the other.
 If two parties enter into a contract, but each one had a different understanding about the terms of it, the court may reform or redefine the contract to match a common understanding., As soon as you believe that the other party has failed to perform as you expect on a contract, you should notify that person. What you consider to be a breach of contract could just be a simple misunderstanding. If you point out the situation, the other party may very easily be able to resolve the problem and save both of you additional time and cost for legal action.


For example, ABC Company ordered 3,000 reams of paper from Paper Supply Company, Inc., at a cost of $4.00 each. When the shipment arrived, it consisted only of 300 reams of paper. ABC’s business manager contacts the supply manager at Paper Supply Company, points out the shortage, and Paper Supply Company admits that it misread the order. The remaining 2,700 reams of paper are shipped the next day.
 If a simple contact does not resolve the situation satisfactorily, then you should send a formal demand letter. In the letter, refer to the terms of the contract and identify the breach that you believe has occurred. If you have previously attempted to negotiate a resolution, you should refer to those efforts in the letter as well. Make a demand for compensation that you believe would be satisfactory.Some contracts require that you send a written demand before ever taking further legal action. If this is the case, and you do not send a written demand letter but go directly to court, your case could be dismissed.
A simple demand letter could say something like, “Dear Sir/Madam, It has come to our attention that you are in breach of the contract dated July 1, 2010. You were required to provide us with 2,500 blocks of Italian marble, but we received only 2,000 blocks of domestic marble. Time is of the essence for our building project. We require that you provide the specific product identified in the contract, no later than 30 days from the date of this letter.”

, The other party may contact you in response to your demand letter and offer some other resolution. Realize that even though you may be entirely correct, working out a settlement directly between yourselves is often cheaper and faster than paying legal costs and going to court. Try to be open to various possible solutions or alternative methods of satisfying the contract.For example, in the case above about the Italian marble, there may be no substitute if you are building a top-quality luxury apartment building. However, you might be able to accept a slightly inferior product in exchange for a reduction in the contract price.
 If no amount of negotiating helps you reach a satisfactory resolution, then you may need to file a complaint and have a court decide the matter. You or your attorney will need to draft a complaint that identifies the terms of the contract and the breach. You also must identify how you have been harmed by the breach and ask for the remedy that you seek. In some courts, you must name a specific amount of money. In others, you may be able to seek damages “In an amount to be proven at court.”If you are taking the matter to court, then you will probably need to hire an attorney. If the amount of money is minimal, you may be able to handle the case on your own in small claims court.
 Many states have laws that set minimum requirements for a party to enter into a contract. If these minimum requirements are not met, then the contract will not be enforceable, whether or not a breach has occurred. In all states, both parties to the contract must be at least 18 years old.In addition, both parties to the contract must be mentally capable. Proving mental incapacity can be difficult but, if proven, will provide a basis for terminating the contract.For example, if a minor enters into a contract to join a video club and make regular payments, and then fails to do so, that contract can be voidable. If the video club tries to enforce the contract, the minor merely needs to prove his age, and the contract will not be enforced.
Someone who is mentally unable to understand the meaning of the contract or the legal impact of entering into it does not have the mental capacity to create a binding contract. The person’s mental ability is an issue that a court will ultimately have to decide.
 An “offer” is the promise that one party to the contract makes when agreeing to do something, buy something, or provide a service. To create a binding contract, the offer must include all the material terms of the deal, so that a third party could review the deal and understand the intentions. An offer that is ambiguous may not be enforced by a court, if the ambiguity is such that it prevents someone from knowing what the intended deal was supposed to be. Therefore, even if one party alleges that the other has breached the contract, the court may not uphold it.For example, if John makes an offer to buy Steve’s car, and John writes, “I will buy your car for $5,000,” the contract may not be enforceable if Steve has two cars and nothing more is written. John could be thinking about the brand new Porsche, while Steve is thinking about the fifteen-year old Volkswagen. If John refuses to pay $5,000, Steve may not be able to prove a breach.
An offer is not enforceable if the material terms are not all provided. If John writes, “I offer to buy your new Porsche,” but neglects to include the price, the contract cannot be enforced. If the seller in this example sues for breach, a court will not enforce the contract because the price is not clearly defined.
 “Consideration” is the legal term that means that both parties to the deal must be giving something of value in order for the contract to be enforceable. Without fair consideration, a court will not support a claim for a breach of contract. Acceptable consideration may be an monetary payment, but it could also include providing a service, taking some specific action, or even agreeing not to do something. The definition of the consideration should be clearly stated for the contract to be enforced.For example, suppose Steve wants to get a new car for himself, so he write a contract to give John his two-year old car. John is pleased and signs the contract. However, then Steve changes his mind. If John sues for breach of contract, he will probably not succeed because he has not given any consideration in exchange for the car. The “contract” is really just a gift.
Another example of consideration, in some cases, is one party’s reliance on the offer. In this case, if John could demonstrate that he relied on Steve’s offer and gave up the opportunity to get a bargain on another car because of what Steve promised, then John might be able to enforce the deal.
Review the required material elements of the contract.
Consider either party’s substantial performance.
Identify your damages caused by the breach.
Seek compensatory damages for most common breaches of contract.
Enforce liquidated damages if they are provided in the contract.
Ask for punitive damages, if the breach is severe or intentional.
Ask for nominal damages if monetary harm cannot be demonstrated.
Demand specific performance for service contracts or specialized products.
Rescind the contract in some cases.
Ask the court to reform the contract to correct mistakes or misunderstandings.
Contact the other party to attempt to resolve any dispute.
Send a demand letter.
Attempt to negotiate a resolution.
Go to court if you must enforce the contract.
Examine each party’s legal capacity to form a binding contract.
Ensure that the contract includes a clearly defined offer.
Look for a clear statement of consideration.
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