What Constitutes a Breach of Contract?
A breach of contract occurs when one party to a legally enforceable agreement does not comply with the provisions of the agreement. The most common examples include failure to perform contractual obligations, failure to make payments, or just refusing to fulfill one’s end of the bargain. A breach of contract can only occur if there is a contract, in writing or oral, between the two or more parties for which the contract can be legally enforced. A party cannot be found in breach of an agreement that is not legally binding because there would be no legal authority for the court to act upon in regard to the parties involved.
In order for a breach of contract to occur there must be a contract that is mutually accepted, and it must be demonstrated that there was a failure of one party to comply with the terms of the contract. It is important to note that this means that the specific contractual term must have been breached by the defendant, and not necessarily that the agreement had been broken. A perfect performance by the obligated party is not required for a breach to have occurred. For example , if an employee’s contract states that they must report to work at 9 a.m., and the employee fails to show up until 9:10 a.m., this failure to meet the contracted terms may be a breach of the agreement.
Each of these elements must be proven by the party alleging the breach in order to establish the legal responsibility of the defendant under the law. For example, if it is shown that the agreement contractually required a person to perform certain duties, that these duties were not performed, and that they were obligated to do so, it is likely the court would find that party unlawfully breached the contract.
A breach can be both material and immaterial. The distinction between the two is important for the determination of potential damages or the amount of damages awarded to the injured party. A material breach is one where the party who has breached the contract caused a significant change in the position of the other party. However, an immaterial breach does not affect the performance or value of the contract, but may have been a minor detail that either party overlooked and does not affect the agreement as a whole.
Civil vs. Criminal Dispute: How These Cases Differ
Before we talk about whether or not a breach of contract can lead to jail time, we need to go over the fact that these are very different kinds of cases. All court cases are broken down into criminal or civil cases. This doesn’t mean that one is "better" than the other, just that they are solved in entirely separate ways, and deal with entirely separate problems.
A criminal case is one where someone is accused of doing something illegal. The purpose of going to court when you get charged with a crime is to determine whether or not that crime was actually committed, and if it was, to determine a punishment. If you are accused of a crime, it’s recommended that you obtain a criminal defense lawyer to protect your rights and fight for you.
A civil case is slightly different. A civil case is more of a disagreement between two parties, where one person feels as though the other has wronged them in some way. The first step in all civil cases is to file what is called a "complaint." A complaint is a document that formally tells the defendant that they are being sued. This document also details the basis of the complaint, and why the plaintiff feels that they were wronged by the defendant.
Once a case has been filed, then the experience can begin for both plaintiffs and defendants. Because of the nature of civil cases, it is possible that both parties will also have lawyers involved. The parties can either be people (also known as "individuals"), or corporations. These lawsuits are also known as torts and can involve a fairly large variety of illegal activities. Civil cases can include breaches of contracts, disputes involving personal injury, medical malpractice, negligence, libel and slander, and fraud.
So how does a breach of contract even factor into all of this? Generally speaking, a breach of contract is always a civil affair. When a party does not fulfill the terms and conditions that are found within a legally binding contract, the other party (usually referred to as the aggrieved party) can file a lawsuit against the party that breached the contract (usually referred to as the breaching party). Because of the nature of the lawsuit, it isn’t about sending the other party to jail, it’s about getting the aggrieved party money to make up for the losses they’ve caused.
Criminal Penalties for Breaching a Contract
In the area of compensatory damages, there are several categories that may apply to cases of breach of contract. A party might be entitled to expectancy (consequential), liquidated or punitive damages. Expectancy damages are specific to lost future profits that had been reasonably expected by the non-breaching party. These damages intend to put the injured party back into the position it would have been in, had the contract been performed to the promised expectations. Expectancy damages are based on the principle that a breach of contractual promise is a denial of benefits the injured party expected to gain as a benefit of their contractual relationship. Liquidated damages are outlined in a contract as being pre-determined before a breach of a contract occurs. Liquidated damages are designed so the non-breaching party knows up front exactly what damages will be assessed against the breaching party. All parties must agree to them and they get sent to the breaching party. Liquidated damages are designed to simplify what can otherwise be a lengthy process of proof of actual losses. Liquidated damages must be reasonable for the scope of the contract to be enforceable. Punitive damages are specifically awarded as punishment to the breaching party. Their intent is to deter similar conduct in the future. Punitive damages are not very common in civil cases, however, but they are based on evidencing an intentional misconduct by the breaching party that showed a disregard of another’s rights. None of the above damages include imprisonment, nor could imprisonment come out as a final verdict in a civil case; including breach of contract. These types of damages are strictly financial. If a breach of contract is considered theft, then the criminal category would apply and imprisonment could potentially occur. This is very rare in this type of scenario and would require extreme circumstances warranting criminal charges. As explained above, damages for breach of contract are generally governed by the aforementioned financial retribution.
When Can You be Jailed for Breach of Contract?
Under typical circumstances, you cannot go to jail for the breach of a contract. Breach of contract cases generally do not involve malicious intent, fraud or any form of criminal activity. Rather, they tend to be civil disputes between private parties over the failure to fulfill obligations outlined in a contract. In some rare circumstances, however, criminal charges may be connected to breach of contract scenarios. In these instances, either you committed fraud, or broke the law in some manner that led to the breach of contract. Both fraud and illegal activity can be prosecuted as misdemeanors or felonies, both of which can lead to jail time . Any situations in which you harm another person or violate their legal rights by breaching a contract have the potential to lead to criminal charges. Cases involving issues such as tax evasion, fraud, and various types of violence can lead to jail time, regardless of whether the primary charge has to do with breach of a contract. The repercussions of being convicted for a crime related to a breach of contract can be severe, since a conviction resulting from a breach of a criminal law will likely overshadow the violation of the contract. For this reason, it’s critical to connect with a criminal defense attorney who can provide you with strong representation if you’ve been accused of a crime related to breach of a contract.
Contract Dispute and Litigation
An alternative to going to court for resolving a contract dispute is using a mediator or arbitrator. Mediation involves the parties submitting their claims to a mediator, who then either brokers a deal between the two sides or gives his or her opinion on what a reasonable award or settlement figure should look like. Mediation can save the parties time and money, and if it can be agreed upon early enough in the proceedings, it has the added benefit of leaving the parties on good terms.
Arbitration involves submitting the claims to a neutral third party who acts like a judge, and rendering a decision on the case. Arbitration is usually faster and cheaper than litigation, and can sometimes render a binding or non-binding decision.
If the contract has a specific provision stating that disputes under the contract are to be handled through arbitration, then the parties are bound to regulate their dispute as set forth in the contract. If the contract says nothing about how disputes are to be handled, the parties may still prefer to handle the matter outside of a traditional litigation schedule.
How to Shield Yourself from a Breach of Contract Claim
To prevent a breach of contract situation, both parties need to be fully aware of all their rights and obligations under the contract. For example, you should clarify the consequences of an act that constitutes a breach and go over contract dispute processes in your contract. Otherwise, a third party can get involved and afterwards instead of either of the parties being held responsible, the third-party party can be held responsible. Research is very important when signing or preparing a contract. Everyone that reads over the contract should do their due diligence to make sure that the contract is legally binding and regardless of which party defaults, it holds up under the law. Many breach of contract cases are avoided by convincing both parties to carefully put the terms in writing so that everyone knows where they stand. Hopefully, it will also encourage the parties to keep their side of the deal .
Furthermore, if you believe you will be signing or preparing a contract, you should consult with a lawyer beforehand. Although they charge fees, consulting a lawyer will save time and money in the long run. They can help you with additional clauses that need to be added to the contract to cover possible breaches. The lawyer can also look over the contract and determine if there are any areas that need improvement. Additionally, they can check to see if any clauses are contradictory. Because many disputes arise when a contract is vague, ensure every term is clear. Make sure you define every word and concept that you frequently use within the contract. If a word has multiple meanings, use a definition the parties can understand. Define each party’s liability and list the consequences for every breach. Moreover, if there is a process that both parties must follow in the event of a breach, such as contacting or sending a letter, ensure it is mentioned in the contract and clearly spells out the process.