How Breach of Contract Might Affect a New Business.

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Business and Consumer

P7 + M3

Advice to a client setting up a mobile phones business

In the event of a successful business, you need to know the remedies available to it and breach of a contract by the consumer for the supply of goods or services.

A breach of contract occurs when one party to the contract fails or states that he/she will fail to perform part or all of his/her side of the bargain.

If the breach has serious consequences for the innocent party he/she will have the choice of ending or continuing with the contract, as well as claiming damages; if the breach Is only trivial, the innocent party must continue with that contract, although he/she can claim damages for any losses. Consider the difference between an electrician who has made a contract to renew all the electrical circuits, lights and sockets in a landlord’s two houses, who fails to renew; one socket in one house and the electrical circuits in the upstairs of one house. These are both breaches of contract, as they both result in loss in one party to the contract. The first is a minor loss in having a socket renewed: a relatively small cost, even if it is essential work. But the second is much more serious and expensive to rectify and would probably end the contract. The house owner may well agree a small reduction in the price he/she is paying for the minor failure and not wish him/her to continue work on the second house.  The first essential therefore is to decide which breaches are sufficiently serious that the innocent party can choose to end the contract.

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Types of terms

The law decides whether a breach of contract is serious enough by deciding which type of term in the contract has been broken. A term in a contract is known as either a condition or warranty. A warranty is not the same as the promise made by manufactures of goods or services In relation to repair or replacement if it should fail within a fixed period of time, often 12 months.

A term which can be either a condition or a warranty depending on the nature of the failure is known as an innominate term.

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