How to bring a breach of contract claim - and how to defend against one

Author: Markel UK

1. What’s my first move in bringing a breach of contract claim?

Look at the terms of the contract – they will determine whether you have a claim and how it could be pursued. Get answers from the contract to the following questions:

• Who are the parties?
• What did they agree to each do, when and how?
• Is the contract for a fixed period?
• Is there a form of dispute resolution specified?
• Are there any terms limiting either or both parties’ liability?
• Are there any particularly helpful or unhelpful terms?
• Could there be uncertainty about how the terms of the contract might be interpreted?

2. I don’t have a written contract. Is that ‘game over’?

Lots of business relationships go ahead without a written contract but that doesn’t necessarily prevent a claim – although it does make it less certain – since contracts do not have to be in writing. A contract exists if all of the following are present:

• Offer – a promise by one party (the ‘offeror’) to another (the ‘offeree’) to enter into a contract on certain terms
• Acceptance of that offer
• Consideration – what the offeree gives in exchange for the offeror’s promise. Sometimes this is nominal (e.g. £1)
• Intention to create legal relations, which is presumed in a commercial setting
• Certainty of terms – the agreement should not lack any essential terms or be too vague for courts to enforce

3. What’s the main remedy for a breach of contract?

Damages. The awarding of damages puts the ‘victim’ in the position they would have been in had the breach not occurred. For example, if a builder puts up a house extension that leaks, the homeowner would look to claim the costs of stopping the leak and repairing any damage. Other remedies include a court ordering a party to fulfil its contract or pay a weekly sum of money for the delay in completing a project.

4. What else should I think about?

It’s important you consider the following:

• Has my claim expired? Parties generally have six years to bring a claim for breach of contract, starting from the date of breach.
• Who am I claiming from? There may be little point suing a company if it can’t pay damages. Does the company have insurance, or does it have a parent company guaranteeing the obligations of its subsidiary?
• How will I claim? Parties should follow the dispute resolution mechanisms specified in the contract. If there aren’t any, use whichever of the recognised pre-action protocols are best suited to the dispute.
• Do I have any other causes of action? Breach claims are often accompanied by a claim for negligence, for example.

5. What about defending a breach of contract claim?

You need to think about all the same things – just from the opposite perspective.

6. What are the key points for defendants to consider?

Consider the following questions to get started:

• Can the existence or terms of a contract be challenged?
• Is there a counterclaim? For example, it is quite common for a claimant to refuse to pay invoices because a job wasn’t carried out with reasonable care and skill. If the defendant considers it was carried out with reasonable care and skill, it may be worth making a counterclaim for unpaid fees.
• Are the losses the claimant is seeking recoverable and properly calculated?
• Has the claimant contributed to their losses, or failed to take steps to mitigate the loss suffered?
• Is anyone else to blame?  For example, a sub-contractor?