Party 1, in turn, has grounds to cancel the contract entirely and move to a separate vendor to procure the product. In smaller deals, this may not be as much of an issue, but if a larger-scale deal went south, it may be the best way to mitigate losses. Party 3 now has a loss of income as a result of their inability to deliver the product and potential grounds to sue for damages. Because Party 2 failed to comply with a basic premise of the agreement - making the product - neither of the other parties can fulfill their portions of the contract. Party 2, however, never made the product.īecause Party 2 never made the contract, Party 3 cannot deliver it, and Party 1 cannot pay for it. Because this type of breach is so critical to the contract being carried out, it is often grounds for the aggrieved party to cancel the contract entirely.įor example, three parties can agree upon a deal where Party 1 orders a product, but Party 2, who makes the product can’t deliver it, so Party 3 agrees to make the delivery to Party 1. What is a fundamental breach of contract?Ī fundamental breach of contract refers to one of the parties in the agreement not keeping their part of the deal by failing to complete a contractual term that was essential to the agreement so much so that another party could not complete their own responsibilities in the contract. Here are some ways to better understand the fundamental breach of contract - what it is, why it happens, and what can be done about it. While a contract breach is never ideal, knowing what type of breach occurred and how to deal with it is critical for moving forward successfully. Whether it was an intentional breach of contract or another problem that occurred that caused a party to simply be incapable of fulfilling a contract, terms go unmet and the agreement is broken. Despite every effort to the contrary, unfortunately, some contracts simply go unfulfilled.
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