breach of contract

Definition

Contracting party's actual failure or refusal to perform (or a clear indication of its intentions to not perform) its obligations under the contract. A breach could be effected by (1) repudiation of obligations before the beginning of the contract, (2) repudiation of obligations before its completion, or (3) a conduct that prevents the contract's proper performance (such as interfering with the other party's performance). Breach of a major term (condition) of the contract (called 'fundamental breach') entitles the aggrieved party to (1) treat the contract as discharged, (2) consider itself free from its own obligations under the contract, and (3) sue the offending party for damages arising from the breach. Breach of a minor term (warranty) allows for suing for damages arising from the breach, but does not allow any party to treat the contract as discharged except where terms of the contract override this implied legal-provision. In contrast to 'rescission of contract,' a breach of contract does not operate retrospectively.