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When a contract between two or more parties is signed, it means the signatories are legally bound to fulfill the terms of the contract. If one of the parties does not fulfill the terms, that party is in breach of the contract.
Being in breach of a contract is illegal as well as unprofessional, and the injured party can take legal action against the party in breach to enforce the terms of the contract or for other forms of compensation.
Injured Party
The first step is for the injured party to send a breach of contract letter to the other party that clearly states in detail how they are not fulfilling the terms of the contract.
It is considered wise to try to work out the breach of contract in person before sending a formal notice letter. If an informal discussion can solve the problem, it will save both parties time and money.
Carefully Examine The Contract
Before the injured party writes the letter, he or she should carefully examine the contract and be certain a breach of contract has occurred. The following points must be included in the letter:
• Most contracts have a notice clause that stipulates how a breach of contract should be notified to the breaching party.
For example, notices may need to be sent by fax, email or registered mail. If these procedures are not followed, the letter may not be legally considered an official notice of breach.
• The letter must be sent to the correct person who signed the contract, and it should be sent through the proper method.
Official Record
• The date is very important because it is the official record of when the breaching party was officially told of the breach. The date could be important if the dispute goes to court.
• The breach should be described. This usually means clearly stating exactly what section of the contract was breached. There are usually three types of breaches:
o One party does not pay or perform duties promised in the contract
o One party says it will not perform its obligations in the future
o One party makes it impossible for the other party to perform its obligations
• Either party may notify the other party of any type of breach, but courts pay the most attention to material breaches.
This means that the value of the contract has been destroyed by the breach. A non-material breach will not usually end the agreement.
Solution To The Breach
• The letter should offer a solution to the breach. If it is too late to fix the problem, the breach notification letter will serve to cancel the agreement and seek damages.
If applicable, the injured party can offer a period of time that the breaching party can fix the breach.
For example, if the contract was for cleaning the winter debris in a large yard, and the contracted person did not do the job at the agreed-upon time, the injured party may offer an extended period of 30 days during which the breaching party can clean the yard.
• The letter should have a professional tone and not contain angry of insulting language, even if the injured party is very upset that the contract was not honored.
This letter may be the basis of court action, so it should be very business-like. The letter should stick to the facts and avoid expressing emotional injury.
• The letter should not threaten the breaching party with a lawsuit. Intimidation is not a good business strategy and can backfire, resulting in an expensive lawsuit that the injured party did not want.
There are four basic responses an injured party may receive after sending a breach notice letter.
No Response
• There may be no response to the letter. After waiting two weeks, it is recommended for the injured party to send a second letter that refers to the earlier letter with applicable dates.
If there is no response to the second letter, the injured party may want to consult a lawyer and send a third letter on the lawyer’s letterhead.
• The breaching party may respond that they are not in breach of the contract. The injured party should be careful how he or she responds in case the other party is correct.
• The breaching party may request a meeting to discuss the situation. This may be a good way to resolve the issue, but it is recommended to have the help of a lawyer in arranging a solution.
• The breaching party may agree that they are at fault. If this happens, the injured party needs to decide how to resolve the issue. Usually, a formal settlement agreement is signed. An attorney will be able to help with this.
Below is a sample breach of contract letter. It should be addressed to the person or company with whom the injured party holds the contract and sent according to the instructions specified in the contract for such letters.
Sample Breach Of Contract Letter
Name of Injured Party
Address of Injured Party
City, State, Zip Code
DATE
Name of Breaching Party
Address of Breaching Party
City, State, Zip Code
Dear Name of Breaching Party:
This letter is formal notice to discuss a breach by you in the contract you and I signed on DATE to clear the debris on the one-acre property at ADDRESS. According to the contract, you agreed to complete the project by DATE.
However, one month later on DATE, the property has not been cleaned. I have enclosed photographs of the property taken yesterday on DATE.
Please contact me as soon as you receive this breach notice, so we can arrange to have the property cleaned as soon as possible. If I do not hear from you by DATE, I will pursue all legal remedies available.
Sincerely,
Signature of Injured Party
Printed Name of Injured Party
List of Enclosures: photographs of property