An introduction to breach of contract claims for UK businesses

A contract is a legally binding agreement between two or more parties. It may be written, agreed verbally, or implied from the parties’ conduct.

Recording agreements in writing with clear terms helps to clarify each party’s positions and reduces the risk of disputes. However, even with a clear contract, issues can still arise if one party fails to fulfil its obligations.

What constitutes a breach?

A breach of contract happens when one party fails to meet its contractual obligations. Breaches are typically considered under three categories:

1. Minor breach

A minor breach is a less serious breach of contractual obligations. It may not significantly affect the contract’s purpose and can often be resolved quickly. Examples include short payment delays or minor delays in delivering goods or services.

Where the innocent party still receives the main benefit of the contract, they may not be entitled to terminate it. They may be able to claim financial damages, but the value of the claim and the cost of pursuing it should be considered before taking action.

2. Material/major breach

A material breach is a serious failure to fulfil a crucial contractual obligation which goes to the root of the agreement and deprives the innocent party of the benefit they expected to receive. Examples include non-payment, supplying substandard goods, or failing to deliver when timing is critical.

The innocent party may be entitled to terminate the contract and seek damages, depending on the contract terms and the circumstances of the breach.

3. Anticipatory repudiation/anticipated breach

Anticipatory repudiation occurs when a party clearly indicates, before performance is due, that it will not or cannot fulfil its contractual obligations.

The innocent party may choose to accept the repudiation and terminate the contract. Alternatively, they may affirm the contract and wait to see whether the other party performs by the deadline.

What terms can be breached?

Contractual obligations are set out in the contract terms. Terms to which a contract is subject are typically understood to fall within one of the following categories:

• Express terms – clearly agreed terms between the parties, either in writing or verbally, such as specific payment deadlines.
• Implied terms – terms not expressly agreed but treated as part of the contract by law to reflect the parties’ shared intention.
• Statutory terms – rights or obligations that apply as a matter of law. For example, consumer protection laws may require goods to be of satisfactory quality and fit for purpose.

Remedies

If a contractual term is breached, this may give rise to a claim for breach of contract. The remedies available will depend on the contract terms, the seriousness of the breach, and the loss suffered. The court may consider remedies such as:

• Termination of the contract – this ends the parties’ future obligations under the contract. A material breach, or a breach of a term which the contract says gives a right to terminate, may allow a party to terminate.
• Financial damages – compensation awarded for losses caused by the breach, including direct losses and, in some cases, lost profits. The aim of damages is usually to put the innocent party in the position it would have been in if the contract had been performed properly. The amount recoverable will depend on the facts, the evidence, and the legal rules on recoverable loss.
• Specific performance – where financial damages are not enough, the court may order the breaching party to carry out its contractual obligations. Specific performance is not available automatically and is awarded at the court’s discretion.
• Rescission – the contract is set aside and treated as if it never existed.

Contact our Dispute Resolution solicitors today

For advice on business dispute resolution, please contact our specialist team by completing our online enquiry form or by calling 0330 191 4857.

It is important to act promptly as limitation periods may apply. If you are considering a claim, you should preserve relevant evidence, including the contract, emails, letters, invoices, and documents showing any financial loss. These documents can help evidence the breach and show the impact it has had on your business.

We will review the contract and understand the issues affecting your business. We can then advise you on your options and whether a breach of contract claim is the right course for your business. Our team can help assess the merits of a potential claim and guide you through the pre-action protocol and court process.