Understanding a Breach of Contract

A contract is considered breached if one or more of the terms and conditions agreed upon in a contract has not been met. If you find yourself entangled in a contract dispute because you believe the other party isn’t fulfilling their side of the deal, sending a notice of breach is the first step in resolving the issue.

What is a Notice of Breach of Contract?

A notice of breach explains the nature of the breach (that is, what the other party did or failed to do) and outlines the actions that will be taken next to either resolve the dispute or terminate the contract and compensate for any losses. Some notices are less formal, serving more as an invitation to discuss and settle the dispute. Other notices are very detailed, with a specific course of action and a timetable for resolving the conflict.

What Should Be in a Notice of Breach?

Any notice of breach should include the following:

• The date – One of the most important objectives of the notice is to create a record of the date when the offending party is officially informed of the breach. You’ll need this information if the dispute ends up in court.
• The proper notice recipient and method – Many contracts include a “notice provision” clause, which lists the contact information for each party and details how any notices will be communicated. Before sending your notice of breach, make sure you’re sending the letter to the right person, via the agreed upon method (for example, by post, email, fax, or courier).
• A description of the breach – Here, you’ll need to explain which clauses of the contract were broken or not fulfilled. If several clauses have been breached, list them all in order of severity.
• A proposed solution – Most contracts include a clause allowing the breaching party to resolve the issue within an established time frame – often 30 days. Even if your original contract didn’t include such a clause, it’s a good idea to give the other party sufficient time to address the issue.

Before Sending a Notice of Breach

Before you send a notice of breach, try to resolve contract disputes informally. This will not only save you time, money, and possibly your business relationship, but it will also give the other party an opportunity to fix a problem that he or she might not have been aware of. In some cases, the damages caused by a breach of contract can’t be fixed. In these cases, it may be best to mutually agree to terminate the contract.