“Breach of contract” is one of those pieces of legal jargon that gets thrown around in everyday conversation, by people who are certainly not legal experts.
Do people use the term correctly? Do they actually know what “breach of contract” means?
It is a term that has real legal implications, and as a consumer, it can benefit you to have a good understanding of what a breach of contract is and how it might affect you.
In the context of consumer protection, this generally means one of two things: You’re breaching a contract you made with a business, or a business is breaching a contract it made with you. Either of these can happen in a variety of different consumer rights scenarios — but we’ll get into those in more detail below.
This is the ultimate guide for consumers: What breach of contract actually means, and how you can protect yourself in a wide variety of contract scenarios.
When two parties (in all the cases we’ll talk about in this article, a consumer and a business) enter into a contract, it spells out the legal obligations that they each have to one another. A failure by either the consumer or the business to hold up their end of the agreement is known legally as a “breach” of the contract.
For a consumer, this might look like:
For a business, this might look like:
Simply put, in a breach of contract, someone isn’t holding up their end of the agreed-upon deal. There can be a lot of different reasons this might happen, so let’s look at a few examples.
Let’s say Consumer A is three months into a yearlong lease on a rented apartment when he receives a job offer in a different city.
Knowing that he has a contract to live in and pay rent for his apartment for nine more months, Consumer A decides to pack up, move out, and simply stop making rent payments. In this case, Consumer A is in breach of contract and could face legal consequences.
Let’s say Consumer B signs a contact with a major cell phone carrier for a plan that offers unlimited monthly data.
However, when his bill arrives, Consumer B notices that he’s being charged data overages by the gig. In this case, Consumer B is not in breach of contract, but his cell phone company is. Consumer B can likely pursue recourse against the cell phone company.
Those two scenarios are pretty straightforward, but the reality is that many real-life breach of contract cases are likely to have some uncertainties and gray areas involved.
One common question consumers ask is whether they can legally breach a contract if that contract is exploitative or unfair.
Unfortunately, the answer is: It depends — on a lot of different things.
If the contract was executed fraudulently or illegally, there are ways to get out without penalties. Contracts can also be deemed unenforceable if they contain any factual errors. And the legal system tends to frown on contracts that are grossly unfair to one party.
Unfortunately, there are no one-size-fits-all rules for determining whether it’s possible to get out of a bad contract. To successfully fight a contract, you’ll likely need a lawyer’s help.
Now for the good news: If you have a contract with a company and the company is acting badly, not delivering what it promised, or otherwise not holding up their end of the agreement, your path forward is a lot more clear.
If you have a contract with a business and you believe they’re in breach, here’s what you can do, step-by-step.
The first step is to determine, to the best of your abilities, whether the business is actually in breach of contract.
To do this, refer back to the contract. It won’t be easy, because contracts tend to be written in confusing legal-ese. But mark or highlight any passages that you think the company didn’t adhere to.
The next step is to take your concerns to the business itself.
Contact their customer service department in writing, if possible, so you have a written record of the complaint you made and their response.
Be polite and courteous, but include the exact language of all the parts of the contract you believe the business breached. Also include any evidence you have, like receipts, screenshots, correspondence with representatives of the company, or anything else that helps you make your case.
When you take your complaint to the business, you might also want to have an idea of what action they can take to resolve the breach with you. Depending on the circumstances, you might want to ask:
If the company can’t or won’t help you, and you still believe they breached the contract, move on to step three.
Sometimes, if a company lets you down, you need outside help to get a resolution.
In the case of a breach of contract by a company, you might need to explore legal avenues to resolve the issue. This could be a lawsuit, a class action suit, or consumer arbitration (which we’ll talk more about below).
Suing a company for breach of contract can be tricky, because many companies that consumers often enter into contracts with — like internet, cable, and cell phone providers — usually include a clause in the contract that prohibits you from filing a civil lawsuit against them.
That leaves you with a couple other options.
If your complaint would be resolved with a refund or monetary compensation that comes to a small amount, you can sue the company in small claims courts. Different states have different limits for the amount you can seek in small claims (it’s usually around $5,000, but you’ll want to look up the exact amount for your state before filing).
If you believe the company wronged other consumers in the same way, you can start a class action lawsuit, which allows people to band together if they all have the same complaint about one company. To do this, you’ll need to speak to a class action attorney.
If your case doesn’t fit the requirements for small claims or a class action lawsuit, you may have another option. Those contractual clauses that prohibit civil lawsuits say you can instead pursue consumer arbitration, and with the right help, it can be a great option for getting resolution from even the biggest company.
Consumer arbitration is a process similar to small claims court — both sides present their arguments and evidence, and a neutral third party (called an arbitrator) makes a legally binding decision about who is in the right.
But to the average consumer who doesn’t have experience in legal systems, it can be an intimidating process. That’s where FairShake comes in.
We believe that power belongs in the hands of consumers, and we’re doing everything we can to keep it there. You tell us about your complaint, and using a combination of automation and one-on-one guidance, we’ll help you submit the paperwork, move through the legal steps, and work toward arbitration.
Banks, gyms, phone and cable companies, internet service providers, and more — we’ve taken them all on. 65 percent of our clients are offered compensation, and the average claim amounts to $700. And if we can’t help, we’ll try to take your claim to someone who can.
Let’s fight your fight together.
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