What is a Breach of Contract?
A breach of contract is defined in legal terms as a failure of a party to perform their obligations under the contract, whether it be a real estate agreement, service contract, sales contract or any other sort of legal agreement that you may have entered into. Either the individual or business that is the breaching party fails to provide the contracted service or meet the contractual obligation, or the contracted party fails to provide a product or service according to the terms of the contract with the other party.
If you plan on sending a breach of contract letter, there first needs to be a breach of contract in order for there to be an effective agreement. Legally, a breach of contract occurs when a party fails to due to his or her own action, legally resulting in a breach of the contract.
A breach of contract is generally categorized as either a minor breach or a major breach. A minor breach usually requires remedial actions to be taken that may include requesting that the contract be fulfilled, requesting damages, or a combination of both .
A material breach, on the other hand, is one so important that it destroys the very foundation of the contract and therefore, one of the parties can be legally excused from performing under the terms of the contract. This type of breach is often seen with home and property purchases because it is generally agreed upon by both parties that a material breach has occurred, such as if the property is discovered to be infested with termites or if it doesn’t have solid foundations.
In order to prove that a material breach has occurred, the party would need to present evidence in a court of law, such as proof that the breach of contract caused financial loss or other types of damages. The breach would also need to be proven to be more than a minor breach that could otherwise be remediated with a small fix.
If you believe that you have been a victim of a breach of contract and that remedial measures are required, it’s important to send a clear and concise breach of contract letter to enforce your rights under the contract.
Relevance of a Breach of Contract Letter
A breach of contract letter is not just a pleading formality; it is an essential component of the claim and serves a number of important purposes.
First, a breach of contract letter helps document the times and particulars of the breach, the breach’s results, and any lessons learned. This information can be useful for your future dealings with other parties and also for identifying how to minimize damages. Second, a breach of contract letter helps memorialize what occurred during the contract negotiation and drafting phase if and when you happen to enter into litigation. A claims process tends to be more forgiving than a court of law. It’s often easier to persuade an insurance adjuster or lawyer with fair and accurate information about how the contract was drafted than to convince a judge that the language used was the best possible interpretation. Third, a breach of contract letter provides clear notice to the other party that you’re seeking recourse and that, if necessary, you’ll pursue such recourse even in litigation. A breach of contract letter is critical to a well-executed broken contract. However, it is only the first step in taking the judicial route and you may find that more effort is needed to negotiate the claim. The party may be entitled to a cure period in which they can fix the breach if possible, and there may be other negotiations and/or information sharing to conduct before you can move ahead with litigation.
Necessary Components of a Breach of Contract Letter
If you wish to pursue further legal action, you must take steps to preserve and document your claims. Sending a letter puts the other party on notice of the breach, as well as ensuring that you preserve your right to damages, should you decide to sue later.
In most cases, there are three key elements that must be included in an effective breach of contract letter:
There are other elements, such as a formal request for payment to bring the other party back into compliance with the terms of the contract. Your demand could also include a proposed timeframe wherein the breach should or must be resolved. While most breaches have detailed timelines, it is not unusual for a party to expect full resolution of the issue within two weeks of the date of the letter.
Having a professional letter prepared by your attorney will only ensure that it is taken very seriously and will add a level of credibility that demands a response.
A Step-By-Step Process to Writing the Letter
Step 1: Start with a Professional Tone
Keep in mind that the letter is a formal business communication. Avoid slang, texting language, and other terms or phrases that may be viewed as unprofessional. You may feel strong emotions about the party’s alleged breach, but this letter could be used as evidence in court as part of your lawsuit later, so you want it to come off as professional as possible.
Step 2: Use a Business Letter Format
If you aren’t familiar with the way to write a basic business letter, there are many available templates you could use. Make sure you include the following information:
Addresses for both parties
The date
The proper salutation (Hello or Dear Mr./Ms. __ [Last Name])
The subject line of the letter
The body of the letter
The closing
Your signature
The printed name of the sender
Step 3: State Who You Are
Remember: This letter will be presented as evidence, so it needs to be as clear and straightforward as possible. Assume your reader knows nothing about who you are or the issues at hand. Therefore, state your name, your company’s name, and clearly detail how the defendant side of the dispute is involved in the situation.
Step 4: Describe the Breach
Clearly detail how the other party has violated the terms of the contract, using quoted passages from the contract to illustrate the dispute. You may also wish to clearly state what kind of damages you’ve suffered as a result of the party’s breach so they understand the severity of the situation.
Step 5: State What You Expect Them to Do About It
Clearly detail what actions you expect the other party to take to rectify the breach and give them a clear outline of the deadline they need to accomplish it by.
Step 6: Detail What Action You Will Take If They Don’t Comply
Clearly and politely state what your next steps will be if the other party chooses not to properly comply with your request. This will usually involve seeking the assistance of an attorney and filing the breach of contract lawsuit.
Step 7: Include Your Contact Information
Make sure to include a phone number, email address, or other means of contacting you beyond the mailing address on the letter.
Breach of Contract Letter Template
[Your Name]
[Your Address]
[City, State ZIP Code]
[Email Address]
[Phone Number]
[Date]
[Recipient’s Name]
[Company’s Name or Business Name]
[Company Address or Business Address]
[City, State ZIP Code]
Dear [Recipient’s Name]:
Subject: Breach of Contract Notice
I am writing to you in order to notify you of my intention to pursue legal action for breach of contract.
On [date of contract], I/we entered into a contract with you regarding [brief description of the contract terms and subject matter].
On [date when you first noticed the breach], I/we formally informed you of the breach. Despite my previous attempts at resolving the issue on multiple occasions, you did not correct the breach nor have you made any attempts to do so.
Under [applicable local law/contract terms] , you have [describe what the other party failed to perform according to the agreement].
As a result of your failure to perform, I am now compelled to inform you that I intent to commence legal action in [XYZ] jurisdiction unless this situation is addressed within the next [insert notice period as per agreement, usually 30 or 60 days].
Please attempt to resolve this matter promptly by contacting me so we can discuss the matter at hand. If necessary, please provide me with documentation demonstrating your efforts at remedying the breach.
If I do not hear from you within the a reasonable amount of time, I will consider my options for next steps and may commence legal proceedings without further notice.
Thank you for your attention to this matter.
Sincerely,
[Your Name]
What Not to Do
When sitting down to craft a breach of contract letter, there are a number of common mistakes that I’ve seen leading lawyers fall into. Repeating these mistakes will more than likely push you into a costly – and even worse, unnecessary – lawsuit. Please consider avoiding these common pitfalls:
- Poorly Choosing your Words. There’s no other way to say it. Your letter is a legally binding document, whether it comes directly from your lawyer or not. If you’re not paying attention to the words you choose or how you phrase your letter, you could be giving up your entire case before even stepping foot in the courtroom.
- Lacking Details. Not every detail has to be included, but the more information you provide – within limits of privacy and relevant information – the more effective the letter can be.
- Making it a Scare Tactic. This is a common one: using your breach of contract letter to threaten the other party in an effort to get them to fix the issue. If this is your strategy, you need to speak with a lawyer immediately. This type of tactic has led to multiple lawsuits, and almost all of them have failed for the party who sent the letter.
- Ignoring Your State’s Law. Even if you have a solid argument, a poorly crafted breach of contract letter will not help you in court if it doesn’t follow your state’s law. Every state has their own laws on the matter, and even if your attorney is licensed in your state, they may be licensed in multiple states, requiring a bit of extra thought when it comes time to craft your letter.
Understanding the Legal Next Steps
Once the breach letter is sent there are some legal considerations to keep in mind. First and foremost, the sending of the letter does not affect your obligations under the contract. So, if for example you are contending that the other party did not timely provide information or payment, but the other party counters with its own claim that you are performing defective work, you are still obligated to perform in accordance with the contract. In other words, unless the contract is terminated, you have a continuing obligation to perform.
Keeping this obligation in mind, what happens when other party refuses to engage in good faith negotiations or reacts in a hostile or aggressive manner to your request? Many commercial contracts contain mediation provisions that require the parties first to attempt to resolve their dispute informally before resorting to court action. Such informal resolution attempts are typically required to be in writing and generally limited in duration. For example, many contracts require the parties to meet in person to discuss the issues.
An impediment to effective informal resolution is when a party is not willing to actively participate in that process . In such cases, unfortunately the only option may be litigation. However, should you decide to engage in early litigation, be forewarned that most courts require that the parties engage in an early informal meeting to see if the matter can be informally resolved before a lawsuit is actually filed. Stated differently, early informal resolution efforts with the other party may also be required by the court even if contractually required in the contract the parties signed.
Even if you believe that the other party’s breach of the contract was so egregious that the contract should be terminated, do not do so without first speaking with an attorney. Many contracts contain clauses that require the parties to follow a specific series of notice and meeting requirements in order to terminate the contract – so do not just send a termination notice without following the contractual terms. Also, if you unlawfully terminate a contract the other party may have basis to sue you for a breach of the contract thus putting you in the proverbial position of being on the defensive.