Understanding Breach of Contract Regulations

Breach of contract rules exist in order to ensure that people who are involved in a contract are treated fairly. Parties to contracts must behave in the way that is specified in the contract unless both of the groups or people involved agree to a change in the terms of the contract. If one person deviates from the contract and the other party accepts that deviation and “ratifies” the contract through their action or non-action, then the deviation may be allowed to stand.

However, if there is no acceptance of the deviation, and the deviation happens to be serious enough to make a difference to the contract, then the person who deviated from the contract is said to be “in breach of contract” and the breach may have consequences depending on the terms of the contract.

When one party fails to perform their end of a contract in a way that prevents the other party from performing their end of the contract, this is straightforward – however, when the party is in breach of contract because of a dispute – for example the timing of the work being done or the quality of the materials is unsuitable, then this is a problem that is harder to manage and the contract law may be complex.

When a breach of contract occurs, it leaves the party that has improperly performed open to a claim from the other party – for damages, or to reclaim anything that was being passed over in terms of the obligations they had in the contract.

The party with the grievance should support their claim by showing that up to the time of the breach they had done everything that was required of them, and that they have done nothing that would make it unreasonably hard, or impossible, for the other party to fulfil their obligations. It is likely that the party that is in breach of the contract will try to make excuses for the breach, and the aggrieved party will need to be able to answer those as completely as possible.

Because contracts can be so complex, the courts have decided to evaluate contract breaches in more subtle ways. Instead of the binary states of “breached” and “not in breach”, they now have more granular terms.

There is a doctrine known as “substantial performance” which you can find out in the Contractual Remedies Act 1979. This notes that if a party has largely fulfilled their obligations under contract law then they will be protected from substantial loss if they fall short on just one minor part of the contract as long as that shortfall does not substantially affect the outcome of the contract.

This limitation prevents a scenario where a minor imperfection is used as a loophole for a customer who wants to avoid paying for a product or service. As long as the contract was substantially fulfilled it will still be considered to have been met in the eyes of the law.

Contract law can be very complicated so anyone who has been affected by a breach of contract seeking sound legal advice, should consult their dispute resolution lawyer. Auckland has plenty of law firms some large and others small operations. If you want the comfort of an extensive team without the expensive trappings of the international firms, then a law firm you might like to try is McVeagh Fleming and Co (mcveaghfleming.co.nz). They can talk you through any breach of contract in Auckland and the options you have.