What constitutes a breach of contract, and what remedies are available?

The legal position

Every breach gives rise to a right to damages. Not every breach, however, entitles the innocent party to treat the contract as at an end. A breach is repudiatory, and so justifies termination, in three situations:

• Breach of a condition. A condition is a term of such importance that any breach of it goes to the root of the contract. A term may be classified as a condition by statute or by the agreement of the parties.
• A sufficiently serious breach of an intermediate (innominate) term. Many terms are neither conditions nor warranties. In relation to such terms, the question is whether the breach has deprived the innocent party of substantially the whole benefit that it was intended to obtain from the contract.
• Renunciation. The other party makes clear, by words or conduct, that it will not perform its obligations. Where the renunciation occurs before the time for performance has arrived, it is an anticipatory breach, and the innocent party need not wait for that time before acting.

A breach of warranty, that is, of a term of lesser importance, gives rise to a claim in damages only. It never entitles the innocent party to terminate.

Election. Upon a repudiatory breach, the innocent party must elect either to terminate the contract or to affirm it. An election to terminate, by accepting the repudiation, must be unequivocal and must be communicated to the party in breach. Silence does not constitute an election. An innocent party that affirms the contract accepts the risk of subsequent events.

Wrongful termination. A party that purports to terminate a contract for a breach that is not repudiatory will ordinarily itself be in repudiatory breach.

Practical implications

Some published material classifies breaches of contract into several categories. For the purposes of the law of Trinidad and Tobago, the essential question is whether the breach is repudiatory, entitling the innocent party to terminate, or gives rise to a claim in damages only.

A late delivery of one instalment under a contract for delivery by instalments will ordinarily give rise to a claim for damages only, unless the contract makes the time of delivery of the essence. A refusal to deliver at all, or the delivery of goods wholly unfit for their purpose, may entitle the innocent party to terminate.

To establish a breach, the claimant must prove three matters: the content of the obligation, as shown by the contract and any relevant correspondence; the performance actually rendered; and the extent of the shortfall. The claimant must then prove the loss caused by that shortfall.

Recommended steps

The contract should be examined for requirements of notice, periods within which a breach may be remedied, and termination provisions, and any such provisions should be complied with strictly.

The innocent party should write to the party in breach, identifying the relevant term, describing the breach, and stating what is required and by what date. The letter should be confined to the facts.

Where the innocent party elects to terminate, it should communicate that election clearly and in writing, having first satisfied itself that the breach is repudiatory.

A record should be kept of all loss suffered, supported by receipts, invoices, quotations and correspondence.

Where the dispute cannot be resolved, claims not exceeding TT$50,000 may be brought in the Petty Civil Court. Larger claims are brought in the High Court. In most cases proceedings must be commenced within four years of the breach. See What is the time limit for bringing a claim for breach of contract?