Breach of Purchase Agreement

In order to understand what a breach of a purchase agreement is, one must first understand the basics of contract law, as well as what constitutes a “breach” of a contract. First, a contract is a legal document that records an agreement between two private parties.

Once properly executed, a contract creates mutual legal obligations and provides certain legal rights. In general, a contract can be either oral or written. However, oral contracts are more challenging to enforce and, as such, should be avoided.

A breach of contract occurs when a party to a valid and enforceable contract fails to fulfill their side of the agreement. Importantly, the specific terms contained within a contract will outline the obligations of the parties regarding what they must do and how they must do it in order to maintain their promise and obligations under the contract.

Then, if a party to the contract does not do what the contract instructs that they must do, the non-breaching party may take legal action and initiate a civil lawsuit against them in court. This civil action is often referred to as a breach of contract action.

A purchase agreement, commonly referred to as a purchase or sales contract, is a type of legal document that provides a written account of the terms of a sale and purchase transaction that occurs between two or more parties.

Thus, a purchase agreement is often a legally binding contract that is enforceable by a court as long as the terms of the contract are found to be fair and valid. Importantly, a purchase agreement will become legally binding as soon as the interested parties agree to the terms of the agreement and sign the document.

However, when the terms of the purchase agreement are not followed, such as one party failing to perform one of their legal obligations as specified in the contract, then that is known as a breach of the purchase agreement.

For instance, a buyer may violate a purchase agreement if they refuse to pay for the services they agreed upon in the purchase agreement or goods that they received from the seller. Another example of a breach of a purchase agreement would be if a seller did not fulfill their obligations to deliver the goods or services that the buyer under the agreement had paid for and purchased.

There are numerous situations in which a purchase agreement may be executed. Examples of common situations in which parties may enter into a purchase agreement include:

• When a person is buying or selling a piece of real estate, such as a house or commercial business location;
• When an individual is purchasing a service package, such as an internet plan, television plan, streaming service plan, or cell phone plan;
• When a person is buying tangible items, such as clothes or furniture from an online store;
• When a manufacturer and distributor arrange to do business together and execute a purchase agreement that outlines the terms and conditions of their working relationship and provides guidance for future business dealings.

In some cases, a purchase agreement will be a fairly one-sided matter, where the seller unilaterally sets the terms and conditions for delivery of the items that are purchased by a purchaser. However, in other cases, the two parties to a purchase agreement will undergo negotiations as to the terms and conditions of the purchase agreement.

As such, you may need help drafting a purchase agreement, or alternatively, you may believe that the terms of a purchase agreement have been breached and have resulted in you suffering damages. If so, then consulting with a local business law attorney may be in your best interests. Business attorneys have experience in drafting, reviewing, and negotiating purchase agreements and handling civil lawsuits when such an agreement has been breached.

What Are Some Examples of Breach of Purchase Agreement?

As mentioned above, a purchase agreement can be breached by either party to the purchase agreement. In fact, in some cases, both parties may even be held responsible for the breach of a purchase agreement. Common examples of ways that a party to a purchase agreement can breach its obligations or the terms of the purchase agreement include:

• By failing to meet their obligations and deliver the purchased goods or services on time to the other party;
• By failing in their obligations by delivering the wrong type of purchased goods or services to the other party;
• By failing to deliver the purchased goods by instead giving them to a party who is not involved in the purchase agreement;
• By refusing to pay the total amount of funds owed to a party that has performed its obligations and delivered the correct goods or services on time;
• By failing to pay in full or to pay in the amount agreed upon by installments, as defined in the terms of the parties’ purchase agreement; and/or
• By using fraudulent or deceptive tactics to induce a sale or purchase of goods or services, such as committing mortgage fraud.

It is important to note that if a court finds that a purchase agreement is invalid and, therefore, legally unenforceable, then no breach of the purchase agreement will have occurred. In such a case, the court may order the parties to amend or create a new purchase agreement that is legally valid and enforceable in court.

How Are Breaches of Purchase Agreements Remedied?

There are a number of different types of remedies that may apply when a purchase agreement is breached. In most instances, when a purchase agreement has been breached, the non-breaching party will initiate a civil lawsuit against the breaching party. Then, if the non-breaching party is successful in their lawsuit, they will be able to recover a monetary damages award.

As noted above, the most common remedy for a breach of purchase agreement case is a monetary damages award. Monetary damages are also commonly known as legal damages and can be defined as the amount of money awarded to the non-breaching and prevailing party in a civil lawsuit.

Examples of common monetary damages and other legal remedies common to breach of purchase agreement actions include:

• Restitution Damages: The purpose of restitution is to restore an injured party to the position they were in before a contract was formed
  • For example, refunding the purchase price of an item is a common form of restitution;
• Liquidated Damages: Liquidated damages are a pre-set amount, often contracted amount of damages, that are meant to reflect an estimate of the actual damages a party should receive, should a contract breach occur;
• Nominal Damages: Nominal damages are essentially symbolic and are awarded when no true harm resulted from the breach of the purchase agreement;
• Quantum Meruit: Quantum meruit is a Latin phrase that translates to “what one has earned” and is intended to recover the reasonable value of services performed by one party for another;
• Remedies in Equity: Remedies in equity refer to a different form of legal remedies, and are not at all related to monetary damages; and
• Punitive Damages: Punitive damages are issued as a means to punish a breaching party in order to prevent them from repeating their actions in the future.

Do I Need a Lawyer for Help With a Breach of Purchase Agreement?

If you are involved in any sort of issue involving a breach of purchase agreement, it is in your best interests to consult with an experienced contract lawyer. An experienced and local contract attorney will be best suited to understanding your state’s specific laws regarding contracts and purchase agreements and how those laws will affect your legal options.

An experienced contract attorney can also initiate a civil lawsuit on your behalf or defend you if you have been served with a breach of contract action. An attorney can also represent you in court, as needed while helping you work towards an appropriate remedy.