Breach of Contract: What to Do When a Contract is Breached

When a breach of contract occurs in the Philippines, it is important to understand the different types of contract breaches in order to determine the appropriate course of action. A minor breach of contract is a partial breach that does not significantly impact the overall performance of the contract. In contrast, a material breach is a significant violation of the terms of the contract that goes to the root of the agreement. If a breach of contract occurs when one party fails to fulfill their obligations under the contract as specified in the contract, the non-breaching party may have legal remedies available to them.

When a breach of contract occurs, the non-breaching party may have the option to seek specific performance of the contract or compensatory damages for any damages resulting from the breach. Additionally, if the terms of the contract provide for it, the non-breaching party may also seek liquidated damages for any actual breach of contract. In some cases, a breaching party may be able to remedy the breach and avoid further legal action, depending on the requirements of the contract.

If a breach of contract cannot be resolved through negotiation or if the breaching party refuses to fulfill their obligations under the contract, the non-breaching party may choose to file a lawsuit for breach of contract. In a contract dispute, the court will determine whether the breach occurred and what remedies for breach are appropriate in the contract case. The court may order specific performance of the contract, award compensatory damages for any damages caused by the breach, or in some cases, order the termination of the contract.

In dealing with a breach of contract lawsuit, it is important to have a clear understanding of the terms of the contract and to be able to demonstrate that the other party has breached the contract. 

Article 1170 of the Civil Code

Article 1170 of the Civil Code states that those guilty of fraud, delay, or negligence, in the performance of their obligations, or those who, in any way, contravene the tenor of their obligations can be held liable for damages.

In the case of Cathay Pacific Airways Ltd. v. Spouses Vazquez, G.R. No. 150843, breach of contract is the inability to fulfill the specifications of the contract without any legal reason. It can also be defined as the failure to perform any promise forming part or whole of the contract without legal excuse.

Those who are guilty of a breach of contract may not be imprisoned as it is a civil case, and not a crime. They can, however, be held liable for damages, as previously mentioned.

In the case of RCPI v. Verchez, the aggrieved party has a right of relief following the proof of existence of a contract and failure of the other party in complying with its terms.

The court will not set free the other party from liability of any sort, following nonperformance of contractual undertaking or contravening the tenor of it.

Remedies for the plaintiff

The plaintiff can file a case and ask for damages for any harm or injury that they may have sustained as a consequence of the breach in the other party’s contractual obligations. This could include financial losses, physical injuries, emotional distress, or any other damages that resulted from the breach of the contract. The plaintiff may also seek specific performance of the contract, which would require the breaching party to fulfill their obligations as outlined in the agreement.

In order to successfully pursue a claim for damages, the plaintiff will need to provide evidence of the breach and the resulting harm suffered. They may also need to demonstrate that they had a valid and enforceable contract with the other party. It is important to consult with a legal professional to determine the best course of action in a breach of contract case. 

In the case of RCPI v. Verchez, a breach of the contract gives the injured party a valid reason to recover whatever it is that may have been lost or suffered as a result. The remedy is meant to protect the interests of the promissee (the party to whom a promise has been made).

These interests include the promissee’s expectation interest, or their interest in having the benefit of their bargain by being placed in as ideal a position as they would have been in if the contract been performed to their satisfaction.

This may also include their reliance interest, which is their interest in getting reimbursed for any loss that may have been caused by their reliance on the contract by being placed in as ideal a position as they would have been in if the contract had not been made.

Lastly, this may include the promissee’s restitution interest, which is their interest in restoring to them any benefit that they granted the other party.

Agreements accomplish little for their makers or for society at large unless they are used as basis for action.

In the event of an infraction, it the defendant’s duty to compensate the injured party owing to their failure to observe their contractual obligation unless they can show proof of extenuating circumstances, or proof of their exercise of due diligence. The attendance of a fortuitous event also excuses them from any liability.

Fortuitous events refer to circumstances that go beyond human intervention, such as fires, earthquakes, floods, and similar natural calamities.

Remedies for the defendant

To escape liability, the defendant must show proof that they have exercised due diligence, or that their non-performance is due to a fortuitous event.

Alternatively, the defendant could argue that the plaintiff was at fault in some way, or that there was a breach of duty on the part of the plaintiff.

Additionally, the defendant could argue that the plaintiff’s claim is barred by the statute of limitations or that the plaintiff is not entitled to the relief sought. Ultimately, the defendant must present a valid legal defense to escape liability. 

For more information on breach of contract and the available remedies, you can get in touch with Duran & Duran-Schulze here. The attorneys at Duran & Duran-Schulze can offer a free case evaluation.

To schedule a consultation, you can contact www.duranschulze.com. Their experienced team of attorneys will be able to provide guidance and assistance in navigating breach of contract issues, a result of the breach and pursuing the appropriate legal remedies.