We are used to seeing clients who are frustrated because someone has failed to deliver their part of an agreement. In many cases, this can be very distressing and inconvenient. If this happens, what can be done about it?
Is there a contract in place?
The first step that must be taken is to identify whether there is a contract in the first place. Contrary to what many people believe a contract does not have to be in writing. A contact is formed where:
Party A makes an offer to Party B:
Party B accepts that offer; and
Some form of consideration passes between the parties.
There also has to be an intent to create legal relations and both parties must have capacity.
Mr Abbot is a fruit and veg wholesaler. Mr Baker is a greengrocer.
Mr Abbot offers to sell Mr Baker 20 kilograms of apples for £10.00 (The offer).
Mr Baker agrees this is a good price and agrees to buy 20 kilograms of apples for £10.00 (The acceptance).
Mr Baker pays Mr Abbot £10.00 (The consideration).
Mr Abbot gives 20 Kilogrammes of apples to Mr Baker.
In the above example, it does not matter whether the details of the “deal” are in writing, or agreed in a conversation. A contract has been formed and executed.
Identifying a breach
After it has been accepted that a contract has been formed, it is important to analyse whether a breach has taken place. A breach of contract happens when one party fails to fulfil an obligation. For example, if in the above scenario, Mr Abbot fails to deliver the apples to Mr Baker or if Mr Baker failed to pay Mr Abbot the £10.00, this would be a breach of contract.
As a basic rule, when a breach of contract occurs, the party (who had the breach happen to) is only entitled to damages which would put them back in the place they had been had the breach not arisen. So in the case study above, Mr Abbot would be entitled to proceed against Mr Baker for £10 if Mr Baker failed to pay him, and Mr Baker would be entitled to sue Mr Abbot for either the apples or the return of his £10.00 if Mr Abbot did not deliver the apples.
This example is a very basic form of contract, in real life, we usually deal with more complex situations that arise from the terms and conditions of the contract, for example, the delivery times or the quality of the apples.
Commencing the process
If a breach of contract has occurred, what are the steps to be taken? It is important to think about how much the claim is worth and consider whether it’s beneficial to commence a legal process.
Before Court proceedings are even considered a ‘letter before claim’ should be sent to the defaulting party of a contract. There are special rules where a business is recouping debts from a consumer, but normally a letter of claim will:
- Outline the terms of the contract;
- Describe the breach; and
- Explain what recompense the injured party is seeking.
Should a letter not result in a resolution, the injured party may wish to commence proceedings in the local County Court.
For claims under £10,000 a claim can be made in the “small claims track”. Such claims do not usually require a lawyer’s assistance as the small claims track is designed for the general public to litigate smaller disputes. The Judges hearing these disputes are usually sympathetic to litigants and will assist where necessary during the proceedings.