Business contracts are the private law that binds businesses and people. Entered into voluntarily, each party has the power to bargain for their rights in the contract and their corresponding obligations. Unfortunately, parties to a contract are not always able to fulfill these contractual obligations. When a person fails to perform, the party has committed a “breach of contract.” When this occurs, the laws applicable to Pleasanton, California and other California cities protect the businesses and investors who have been damaged by the breach of contract.
A “material breach” is a legal term for a party’s failure to perform his her or significant or substantial duties under the contract. In contrast to a minor breach, a material breach is a breach that is significant enough for one of the parties to the contract to sue the other. For example, if a producer of widgets was contractually obligated to deliver 1,000 widgets by the end of the month, there would likely be a material breach if the party failed to deliver more than 200 widgets by the end of the month. If, however, the 1,000 widgets were only a single day late, absent any exigent circumstances, it is likely this would only be considered a minor breach.
An anticipatory breach, also known as repudiation, occurs when one party receives advanced notice that the other party will breach the contract in the future. The non-breaching party can receive this notice through either the words or the actions of the other party. Under the laws applicable to Livermore and Oakland and other California places, a party can receive notice of an anticipatory breach in several ways:
- The non-breaching party can receive information about an action that makes it impossible for the other party to perform the contract. For example, if the other party to the contract was a business who had ran his business into the ground, recklessly taking out loans, and failing to deliver to all of their other customers and no longer paying the suppliers necessary to create their product. The non-breaching party will not need “express words” that the other party will not be fulfilling their obligations – the actions of the party are sufficient enough, in this case. Another example of a party’s actions that would indicate an anticipatory breach would be if the company is preparing to file for bankruptcy, or if the party loses ownership of the goods or property that is the subject of the contract.
- The party can also expressly state their intentions not to fulfill their obligations under the contract. The legal term for this is an “express repudiation” and is probably the most obvious form of an anticipatory breach.
The California Uniform Commercial Code applies to the sale of goods in the East Bay, California and other California places. Under the UCC, a party to a contract for the sale of goods has a right to demand “adequate assurance of performance” of the contract. If the other party fails to provide documentation or evidence of their intention and ability to fulfill their contractual obligations, the non-breaching party has the right to end the contract within 30 days of the request. If you have any questions about when a party has breached a contract, contact JGPC Law at 925.463.9600.