Breach of Contract

A breach of contract happens when one party fails to do what they agreed to do in a contract. That could mean not paying, not delivering services, missing deadlines or violating specific terms.

In simple terms: You sign an agreement with someone and they don't hold up their end. That's a breach.

How It Works

When both parties sign a contract, they commit to specific obligations. A breach occurs when one party doesn't follow through.

Some are minor breaches. A payment few days late may not be a problem. However, other breaches can be serious and prevent the contract from working at all. Depending on what the contract says, the non-breaching party may be entitled to damages, termination of the agreement or to have the other party fix the problem.

Why Legal & CLM Teams Should Care

A breach happens but nobody catches it until serious damage has occurred. Your vendor misses a deadline. Weeks pass. By then the customer has lost trust.

Nobody is keeping track of what is owed and when. Breaches add up. Legal teams find problems in disputes, not fix them early. That’s when documentation is critical. If the breach ends up in court, you need to be able to document exactly when it happened and what impact it had.

Example Use Case

The company has a contract with a vendor to provide monthly reporting and system maintenance by the 15th of each month at a cost of $5,000 per month. In the second and third month the vendor is late with his reporting and only does maintenance once instead of four times. The customer will record each missed date and will give written notice of the breach.

At this point the customer has grounds to claim breach of contract and pursue remedies under the agreement.

How It Relates to Adjacent Concepts

Obligation management, service level agreements, dispute resolution and termination rights are all matters of contractual breach. These provisions lay down what each party owes and what the other party may do if obligations are not fulfilled.

FAQs

What counts as a breach of contract?

When one party fails to do what they agreed to in the contract.

What are common examples?

Non-payment, failure to deliver goods or services, missed deadlines, breaking confidentiality or failing to meet performance standards.

What can you do if there's a breach?

Seek damages, terminate the agreement, require the other party to fix it or pursue other remedies depending on what the contract allows.

Related Terms

• Obligation Management
• Service Level Agreement
• Dispute Resolution Clause
• Termination for Convenience vs. Cause
• Limitation of Liability
• Contract Lifecycle Management

Monitor obligations and track contract performance with SpotDraft Contract Management. Or request a demo to see how teams stay on top of commitments throughout the contract lifecycle.