Typically, when multiple parties are subject to a contract, they are legally bound to upholding the terms of said contract. If any of the parties fail to uphold the terms of the contract, they are legally considered to be in breach of the agreement. As a result, the injured party is then entitled to take legal action and, subsequently, can enforce the terms of the contract or claim compensation. To do so, a breach of a contract demand letter is usually regarded as being the first step in initiating legal communication and proceedings – It is a statement that entails the ways in which the aggrieved party claims that the other party(s) are in violation of the agreement. It is considered to be a formal document and is generally a precedent to any sort of legal action. Unofficially, it can be enough to coerce the violator(s) of the contract into resolving the issue and is considered a cost-efficient, quick, and hassle-free way to address contractual issues.
Proving Breach of Contract
As the aggrieved party prepares to draft the breach of the contract demand letter, they must be able to understand the terms of the contract and highlight the exact ways in which they claim the alleged parties have acted in violation. This means that the onus of establishing the breach falls on the writer of the breach of contract letter. As a result, the aggrieved party will need to explain the following things;
- Proof that the agreement was in place, via the actual contract itself.
- Highlight the terms that were violated and explain, with evidence, how they were disregarded by the other party(s).
- Entail the negative impacts and/or loss(es) incurred by the aggrieved party due to the actions, or lack thereof, of the alleged party(s), which, in turn, led to a violation of the terms of the contract.
Once these premises are established by the aggrieved party, they will need to put them down in words, explicitly explaining the terms of the contract and how they were violated. For these reasons, it is highly recommended that an experienced lawyer assists in the drafting of the breach of a contract demand letter. Finally, the aggrieved party must also be aware of legal doctrines like that of mitigating loss. Essentially, this states that the aggrieved party must not do anything to worsen the situation and should not act towards increasing the damage caused by the breach.
Including the Requisite Information
First, the aggrieved party must review the contract to verify the clauses laden in the contract. Typically, this includes a notice clause, which outlines the process by which the aggrieved party may notify the alleged party(s). This includes logistical things like a method of transmission, which is generally mail or fax, as well as a rough timeline. It is imperative that these guidelines are followed, as failure to do so may be seen as a breach of contract in and of itself. Additionally, the Date is also very important, as it signifies to the legal authorities the exact moment of notification between the parties bound to the contract.
Furthermore, the breach must be described so as to make it easily comprehensible for those receiving the letter. This generally includes referring to the part of the contract that was breached, which generally falls under the following categories;
- One party fails to remunerate other party(s) for their services as outlined in the contract
- One party fails to perform its services as outlined in the contract or states that the said party will not perform said services in the future.
- One party actively and intentionally makes it impossible for the other participating party(s) to make it impossible to fulfill their side of the contract.
Once the aforementioned details are listed out in the draft of the breach of the contract demand letter, the aggrieved party will need to verify that it complies with the local pre-action protocol. This refers to the legal guidelines on how parties subject to a contract must act before initiating any legal proceedings. Failure to comply with these guidelines can result in penalties imposed by the court, which is why it is important to verify that the letter adheres to the pre-action protocol. Finally, the aggrieved party will also want to establish that failure to rectify the breach of contract is unacceptable and will result in the initiation of legal proceedings against the alleged party(s).
Demand Letter Example
Below, you can find a sample of a breach of contract demand letter that can be used as a template to draft the same;
-> NOTICE OF BREACH OF CONTRACT
The purpose of this letter is to notify you regarding a breach of the terms of the contract signed between you, and on . According to the contract, you have violated the following particulars; For these reasons, we hold you responsible for proceeding in acts that have directly violated the terms of the aforementioned agreement. We ask that you work towards rectifying said violation and in order to uphold the original contract and avoid any legal proceedings that may be initiated if you fail to do so.
The Legal Remedies!
Many contracts also explicitly outline the types of remedies that an aggrieved party is entitled to, in the case of violation of the terms. As a result, a thorough review of the contract may just provide the exact remedies that may be available and will generally help the aggrieved party grasp all of the available options. Common monetary remedies include the following;
- Compensatory Damages – The alleged party, or in this case, the defendant, agrees to cover and reimburse the aggrieved party for all losses and monetary damages incurred due to violation of the terms of the contract.
- Consequential and Incidental Damages – Consequential Damages typically refer to losses and/or damage caused indirectly as a result of the breach. This typically refers to situations where damage was caused not by the breach itself, but by the end result. Incidental damages are caused directly by the breach itself. In either case, the aggrieved party may be entitled to damages.
- Liquidated Damages – In the case that loss and/or damage is hard to define due to the specific nature of the contract Liquidated damages refer to an agreed-upon, a tangible estimate of the damages that may be caused in the case of a breach. If this clause exists, the aggrieved party is entitled to this estimate.
- Punitive Damages – Punitive damages usually occur when it is proven that the defendant’s actions merit punishment and not just monetary compensation. In these cases, punitive damages are applied, and the court can issue a number of legal remedies.
Additionally, if the matter is taken to court, there are a few more outcomes that are likely;
- Specific Performance – When a court deems that there is no need for any sort of damages, it may apply the principle, which orders each party to follow through with the contract as per the original agreement.
- Rescission – In the case of Rescission, the court orders, essentially, a cancellation of the contract. No damages are awarded, and the contract is declared null and void.
- Reformation – In the case of reformation, the court deems that the original intentions of both parties were not accurately reflected in the terms laid out in the contract. As a result, it will make suggestions to remedy the contract and rewrite with a more accurate understanding of the original intentions of all parties.