What Happens If You Break a Contract

A contract once formed is a legally binding agreement. The parties to the contract have agreed upon certain terms and conditions of the agreement and are intending upon following it to the letter. However, occasions might arise whereby one of the parties or all of them might have to break the contract. When this happens there are legal consequences that follows suit. So first, let us consider the circumstance when a contract becomes broken.

A contract can be broken or a better word to use – discharged in a number of ways. This includes partial performance, breach of the agreement made, frustration and by mutual agreement between the parties concern. If the contract is broken intentionally as one of the parties might find the contract to un-lucrative, then the other party might seek damages from the party breaking the contract. Example: Ben enters into an agreement with Paul to teaching his Business Law for $100 per lesson with a minimum of 10 lessons. Ben collects from Paul the money for the 10 lessons amounting to $1000 in advance. Ben was suppose to start teaching Paul the following day. However, after entering into this agreement Ben had another offer to teach Sue who is willing to pay him $5000 for 10 lessons. Sue wants Ben to start teaching her the following day at the same time as Paul. Ben decided that teaching Sue is more lucrative then Paul and decides to call Paul and terminate the agreement and return his money.

In this situation Ben is clearly breaking the contract. The remedies that Paul has over Ben in such a situation is that he can sue Ben for specific performance in which case Ben will be forced to teach Paul at the agreed price instead of Sue. It is also possible that Paul might just take back his money and consider the agreement he made with Ben as null and void. There is one more possibility in that Paul might claim that he has invested in books and additional material to prepare for the tuition that Ben is going to conduct and as such he might claim from Ben the damages in terms of money for this investment he made.

As to whether Paul will be successful in his claim is a matter the court will have to decide. Sometimes a contract becomes broken because of a term called frustration. This happens when some unforeseen event occurs that disrupt the contractual agreement between the parties. The is an English case called Taylor v Caldwell. In this case one of the parties hired a music hall for a series of concerts. But before the first concert, the music hall was destroyed by fire. In this case the court declared that the contract was frustrated as it has become impossible to perform since the subject matter namely the music hall was destroyed.

An example to illustrate the concept of frustration in breaking a contract is like you book a pair of tickets to a rock concert performed by a famous rock group. Just before the concert, a few members of the rock group became ill as the consumed the wrong kind of food in the hotel. Therefore the concert is cancelled. In this case you can probably claim your money back and that’s it. There might be much chance for you to sue the rock group for non-performance as they were ill.