All questions

Breach of contract

When one party to a valid contract is not complying with a particular term, its conduct may amount to a breach. When a breach of contract occurs, the innocent party is entitled to bring a claim in relation to the breach and seek compensation – usually in the form of damages.

The burden is on the claimant to show, on the balance of probabilities, that there has been a breach of contract that has caused loss. The value of the loss claimed will most likely determine which type of court in England hears the case. Before bringing a breach of contract claim, the claimant should comply with the applicable pre-action protocols, annexed to the CPR.

i Termination for breach

Under English law, a breach of contract does not automatically entitle the non-breaching party to terminate the contract. A repudiatory breach, however, is a breach of contract that allows the non-breaching party to treat the contract as being at an end. The most common example of a repudiatory breach is a breach of condition (although a fundamental breach of an innominate term may also be a repudiatory breach) that allows the non-breaching party to terminate the contract and claim damages, regardless of what the consequences of the breach are. Breaches of warranties do not terminate contracts and the correct remedy in that situation is damages. Parties are also entitled to explicitly state breach of a term results in termination, even if that right would not be a right under common law.

It is for the non-breaching party to elect whether it will accept the breach and treat the contract as terminated or affirm the contract and require continued performance.

ii Anticipatory breach

An anticipatory breach is where one party indicates, either by words or conduct, that it will not perform all or some of its obligations under the contract, such that the result of its performance will be substantially different from the requirements of the contract. If the anticipated breach would be a repudiatory breach (and it would be for the claimant to prove this), the non-breaching party is immediately entitled to terminate – without waiting for actual performance or breach.

iii Causation

In order to bring a breach of contract claim, the non-breaching party must show that there is sufficient causation between the breach and the loss it has suffered. The breach must be the effective or dominant cause of a loss.

Causation may be complicated by a third party's intervening act or other event. If there is such an act or event between the breach of contract and the harm suffered that 'breaks the chain of causation', then the court may hold the party in breach not to be liable for the loss.