Definition: A breach of contract is a situation where certain conditions of an agreement are unfulfilled either intentionally or unintentionally. In other words, one of the contractual parties fails to comply with one or more stipulated clauses.
What Does Breach of Contract Mean?
Legally speaking, an agreement could be either explicit or implicit. In both cases, the parties are obligated to comply with certain conditions and failing to do so will be considered a breach.
The consequences of such scenario may vary, depending on the nature and reach of the agreement but they could include fines, reputation damages, damage compensation and other economic or non-economic penalties that will affect one party’s ability to continue enjoying the benefits of such contract.
In some cases, a breach can also lead to an immediate termination of the contract, depending on the stipulations of the agreement. A legal concept known as fundamental breach is one of those scenarios where a party can consider itself free from any obligations acquired through the contract or in a position to file a legal claim against the offender, since the breach practically contradicted the essential elements of such agreement.
Example
DigiCab LLC is a virtual platform that provides a marketplace for taxi drivers. The company reviews and assesses each new driver before they are approved to act as a service provider within the platform.
As part of this procedure, the driver has to sign a legal agreement that includes certain fundamental terms such as one that states that in the event of three severe accidents/crashes reported by a customer the agreement between the company and the driver will be immediately terminated and there will be no way for the driver to be reincorporated into the system in the future. These accidents are understood to be fundamental breaches of the DigiCab contract and drivers understand and acknowledge such clause when they agree to sign the service conditions.
