When a party to a contract fails to fulfill all of her promises, she has breached the contract. What will a court look at in responding to a breach of contract?
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Typically, a court would not impose sanctions over minor issues. To constitute a violation of the contract, the breach must be material. A material breach is important enough to defeat an essential purpose of the contract.
Sometimes, contracts state the consequences of a breach, such as the amount of damages. A damages clause can specify a certain amount or a limitation on the total, or other variations. In these cases, the court would probably enforce the provision of the contract. But the vast majority of contracts have neither liquidated damages nor damage caps.
A court may also look at whether the parties acted in good faith or with sole discretion. Reasonably means ordinary or usual under the circumstances. Good faith means an honest effort to meet both the spirit and letter of the contract. A party with sole discretion has the absolute
right to make any decision on that issue. Sole discretion clauses are not entered into lightly.
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