An Overview of the Key Issues Governing Breach of Contract Cases in 2020 and Beyond

It is important for everyone to keep up with the changing legal landscape. With the COVID-19 pandemic raging, breach of contract cases are sure to be major issues. While many people think it is easy to tell when a breach of contract has taken place, this is not always the case. There are a few straightforward cases of breach of contract. Some of these might include an employer who didn’t pay an employee enough money for his or her time. Perhaps a contractor started a job and didn’t finish it. With breach of contract cases on the rise in 2020, it is critical for everyone to know about some of the most common reasons why a breach of contract case might take place. There are a few major types of breach of contract cases. These include anticipatory, actual, minor, and material.

Comparing an Anticipatory Breach with an Actual Breach

The vast majority of breach of contract cases are going to call into one of two separate categories. They are either going to fall under the category of actual breaches or anticipatory breaches. When it comes to an actual breach, this takes place when one person simply refuses to fulfill his or her side of the contract. Or, that person might perform that task incompletely. There is usually a date in the contract specifying by which time the task has to be completed.

An anticipatory breach takes place when one party announces that he or she is not going to fulfill the contract by the due date that is listed on the contract.

Both of these breach of contract cases are bad for everyone involved with the contract. Both of these have the potential to waste a major amount of time and money. It is easy to see how this can lead to a lot of frustration for those who are involved in the breach of contract case. On the other hand, there are remedies that can handle both anticipatory and breach of contract cases. No matter what type of breach of contract case might be ensuing, the innocent party has the right to take action in an effort to seek compensation for any and all damages involved. There is another distinction that has to be specified in breach of contract cases as well.

A Minor Breach vs. a Material Breach

When it comes to breach of contract cases, they can also be categorized as either minor or material. A material breach of contract takes place if one party ends up with something that is far different than what was specified in the contract. For example, a web designer might be hired to set up a complete website that is supposed to serve as marketing material for a restaurant; however, what he or she received was a blog about the best type of candy. This would be considered a material breach of contract. In this case, the non-breaching party does not have to hold up his or her end of the bargain and should be entitled to seek damages a result of the breach of contract. In this example, the person who hired the web designed would not be forced to pay the designer for a job that was not completed.

The other type of breach of contract case is called a minor breach. This is sometimes called a partial breach. While the term used is “minor,” this can still be a big deal. A minor breach of contract case ensues when one party did not perform some part of the contract even if the rest of the item was still delivered. Think about the restaurant website from above. If the site was completed as requested but it was delivered late, this would be considered a minor breach of contract case.

Now that the various types of breach of contract cases have been covered, it is time to take a closer look at the damages that might be involved.

The Types of Damages Stemming from a Breach of Contract Case

When someone is the victim of a breach of contract case, there are two separate types of damages that might be available. Usually, these damages take the form of monetary compensation for any loss that the victim might have experienced. These two damages include:

  • Expectation Damages: These are damages that are awarded to get someone out of the contract based on the value of the contract itself. For example, if an employer underpaid can employee, the expectation damages would be the difference in what the employee was paid and what he or she should have been paid.
  • Consequential Damages: This type of compensation is a bit trickier. These are damages that are meant to cover damages that are considered indirect. For example, if the restaurant was unable to open because the website wasn’t done on time, then these damages would be expected to replace this revenue.

Depending on the type of breach of contract case, the damages could be substantial. So, how is this going to play out when it comes to the pandemic?

Breach of Contract Cases Could Be on the Rise with COVID-19

The pandemic has led to some major issues in nearly every industry. There are numerous breach of contract cases that might ensue due to the massive disruption that has taken place throughout the country. With thousands of businesses closing and unable to continue operating as normal, contracts are in jeopardy. Some of the breach of contract cases that might ensue include:

  • Suppliers are not able to meet the demands of their orders due to problems in the supply chain, increased price of their supplies, and shortages throughout the supply chain itself
  • Buyers in contracts might not be able to pay suppliers for their shipments because the pandemic has hurt their revenue
  • There could be breach of contract cases stemming from government regulations that prohibited one of the parties from performing his or her end of the contract because they were labeled a “non-essential business”
  • Commercial businesses might not be able to pay their rent because of the numerous factors outlined above

These are just a few of the major issues that could develop as a result of the COVID-19 pandemic. All of these might lead to a potential breach of contract case. It will be interesting to see how the courts handle these cases as they get filed. They could set an important precedent for the future.

What About International Contracts: China

Breach of contract cases can extend into international business law as well. One of the biggest issues that might arise is a delay in delivery by Chinese suppliers, which could create a breach of contract status. Now, it is possible that this could create a situation known as a force majeure. This is an unforeseeable circumstance that causes one party to be unable to fulfill its obligations. Courts will have to determine if there was a real impossibility to fulfill the contract or if it became more expensive and difficult to fulfill.

It is important for everyone to read the contract carefully because some of the most common examples of a force majeure include:

  • Healthcare emergencies
  • Epidemics
  • Actions by the Authorities

While COVID-19 might fall under all three of these categories, it is still incumbent on the party activating the clause to prove that measures being used to combat the virus amount to the force majeure provision. Evidence that the force majeure clause applies include:

  • Closing borders
  • Travel bans
  • Shelter in place laws

To confirm the existence of force majeure, it is important to contact the authority in the country where the contract was arranged. In China, this could be the China Council for the Promotion of International Trade. Anyone who is planning to lean on the coronavirus for breach of contract cases must document force majeure and use it in any legal proceedings.