Breach of Contract occurs when one party fails to fulfill their obligations as outlined in a legally binding agreement, leading to a violation of the contract's terms and potential legal consequences.
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Last Updated: January 22, 2026
The definition of a breach of contract is when someone doesn’t fulfill a promise they made in a legally enforceable contract. This could mean that one party doesn’t pay what they agreed. It could also mean that a party doesn’t deliver the promised goods or services.
It’s essential to know the definition of a contract to understand the definition of a breach of contract. A contract is a legally enforceable agreement between two or more parties. Parties can make promises to perform specific actions like delivering goods, paying money, or providing services. If one of the parties fails to perform what they promised under the contract, that is a breach of contract.
The disadvantages of a breach of contract are many. If a business owner considers breaching an agreement, they can be liable for damages to compensate the other party for their failures. Sometimes the contract states the penalty they’ll owe if they do not do what you promised. If the other party takes them to court, a court can award damages to compensate the affected party for their loss. This can often add up to more than just the cost of performing the contract.
Another issue is that sometimes a contract adds additional penalties for a breach of contract. The contract may require the breaching party to pay a late fee or an additional amount for every day or week that passes while the contract is breached. The contract may also require a breaching party to pay for legal fees and costs.
Based on a breach of contract’s definition, there are rarely any benefits to a breach of contract. But there are occasional situations where delivering on the contract may cost more than breaching it. In this case, it may be more cost-efficient to breach and absorb the loss.
A breach of contract might benefit the non-breaching party, which has rights under the law. If the innocent party can prove a breach of contract, the breaching party will have to pay compensatory damages. These damages compensate an innocent party for their losses due to the breach.
Occasionally, the party that doesn’t breach the contract may benefit from another party’s breach if the first party could not fulfill the obligations of the contract. For example, suppose that company A and company B enter into an agreement where company A promises to pay company B $5,000 for 1,000 shoes to be delivered on a certain date. However, company A has a terrible month and cannot afford to pay for the shoes anymore. Then, company B doesn’t deliver the shoes. Company A benefits from Company B’s breach of contract (in this instance).
No other term exactly captures the meaning of a breach of contract. Sometimes a breach of contract is referred to as a “breach of a promise” or a “breach of trust.” However, promises are not always legally binding or legally enforceable. A breach of contract’s definition is unique: it’s when a legally enforceable promise is broken.
Examples best explain what is a breach of contract. Here is one example:
Suppose someone operates as an independent contractor, and they’re a writer. They sign a contract, agreeing to write three stories for the magazine by the end of the year. In exchange, the magazine agrees to pay the writer $1,000. If the writer doesn’t draft and submit the articles by the end of the year, they’ll breach the contract. Meanwhile, if the writer provides the pieces but the magazine doesn’t pay them, then the magazine would be in breach of contract.
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Understanding all of the terms of a contract is important so that business owners don’t breach the contract and know their rights if the other party does breach it. However, writing a contract can be difficult. Luckily, ZenBusiness can help. They offer a Freelance Contract template for freelancers to craft their service contracts. Plus, they help explain different contract generation tools available to small businesses.
Entrepreneurs who still need to set up a small business should check out the ZenBusiness Formation Plans, which help streamline the process of forming an LLC or corporation. Afterwards, their Worry-Free Compliance service can help entrepreneurs keep their business compliant over the long term.
Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. For specific questions about any of these topics, seek the counsel of a licensed professional.
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