A Guide to Construction Contract Breaches: Implications and Solutions

Both parties try to avoid a breach of contract wherever possible, yet they often happen, causing disruption and unwanted hassle to all involved. When such a breach occurs within a construction agreement, understanding the implications is paramount. In this article, we will provide an overview of what constitutes a breach of contract, how it impacts both parties and the potential remedies available. 

What is a Breach of Contract?

Simplified, a breach of contract occurs when a party fails to meet its obligations outlined in the contract terms. A breach manifests in various forms, including:

• A failure to provide goods at the required standard
• A failure to carry out services to the required standard.
• A failure to pay.

It's important to understand that a breach of contract varies in nature and severity, and each instance is contingent upon unique circumstances and facts.

The different types of contract breaches

In legal contexts, breach claims typically fall into three categories:

1. Breach of Warranty: These breaches are often the least severe, resulting solely in payment of damages without additional remedies.
2. Breach of Innominate Terms: These breaches can swing in severity depending on the circumstances. They may constitute breaches of warranty or breach of fundamental terms. In cases of breach of fundamental terms, additional rights will accrue.
3. Breach of Fundamental Terms: This type of breach strikes at the core of the contract, potentially questioning its existence. Common causes include failure to perform the contracted work or reckless disregard for the contract terms. Such breaches usually entitle the affected party to terminate the agreement and seek damages.

The potential remedies available

In most cases, the remedies for a breach involve receiving damages equivalent to the losses incurred. In severe breaches, contract termination may be possible; however, wrongful termination can lead to severe consequences, necessitating legal guidance.

Another option is seeking an order for specific performance, a legal recourse that ensures the completion of a task outlined in the contract. Though rare, courts may grant such orders, particularly when dealing with unique items like specific properties, renowned artworks, or distinctively branded entities.

It's important to note that even for unique contract items, courts typically refrain from ordering specific performance for agreements requiring ongoing relationships, such as maintenance contracts.

Determining the cause of a claim

The losses you seek to claim must directly result from the alleged breach of contract by the party you intend to sue.

In construction projects, various scenarios may or may not lead to such losses. You should carefully assess the link between breaches and resulting losses. For instance, if a builder completes the work late and you seek damages due to their liability for defective work, the claim will likely fail. This is because the builder's lateness doesn't directly cause the defects. However, if you claim damages for additional kenneling costs for a family pet, this is a reasonable claim, as delayed work could incur extra expenses for pet accommodation.

Naturally, this doesn't stop your ability to recover the costs for defective work; instead, the approach adjusts slightly. For example, in a claim for damages due to defective work, the builder is expected to have performed the works to a specific standard. If the work falls short of this standard, the builder is liable for the defects and must pay an amount of £X to remedy the situation.

These examples illustrate just a fraction of the damages recoverable. In reality, numerous damages may be claimed.

Reasonably foreseeable claims

Numerous losses can stem from any contractual breach, regulated by the principle that losses naturally arising from the breach must have been reasonably foreseeable. It's important to note that while the precise loss need not be foreseeable, the type of loss must be, such as "losses incurred to rectify defective works".

The earlier examples illustrate reasonably foreseeable losses resulting directly from the breaches. However, some losses might be deemed unrecoverable, such as the expenses incurred for re-booking plane tickets due to delayed work causing a missed flight. While the breach could contribute to this loss, it may be too remote for recovery, as it may not have been foreseeable or naturally arising.

Highlighting specific losses when drafting the contract can hold the other party accountable. For example, suppose you informed the builder about the flight and the urgency of timely completion. In that case, the claim for the plane ticket cost may be recoverable just as long as the builder was informed at the outset. 

Seek professional advice

As the above examples show, the path to a successful claim can be complex, and it's recommended that you seek professional advice before taking action. For further details or legal guidance regarding construction contract breaches, please reach out to our Construction Litigation Specialist, Andrew Cullyer, on 023 8063 9311 or via email at enquiries@warnergoodman.co.uk.