 In this video for sub-sub-unit 4.3.1, we examine how a contract can be breached, breach of contract, how can a contract be breached or violated or broken, and some of the consequences of a breach. We're going to determine what constitutes a breach, the types of breach and the impact of each, what constitutes a material breach and the importance of material breach, and lastly the impact of the UCC, which if you recall again, we're talking about the Uniform Commercial Code, the Uniform Commercial Code. Alright, so let's take a look and talk about what is a breach, what is a breach, and as you consider what a contract is and how it comes together, you might have some answers of your own, think about it. A breach can occur in several situations. For instance, a breach may occur where a party fails to perform obligations, so a failure to perform obligations under the contract is often a breach. Where there are time obligations that are not met. For example, something has to happen by a certain time according to a contract. Or if there's only been partial satisfaction of the terms, partial satisfaction of the terms of the contract. A key issue in all of these things as we look at breach is, is there a material breach? Is the breach material? That will impact the availability of a remedy and it will also impact what kind of remedy can be given. So let's look at some specific types of breach. Okay, types of breach. One we've already mentioned, material breach. Material breach is a substantial breach, a substantial breaking of the contract. Keep in mind, parties to a contract often will not perform their obligations perfectly, so you have to determine whether a non-performance is material or not. Some of the key factors in determining whether there is a material breach include looking at how important is the loss of benefit that the aggrieved party reasonably expected. You want to look at how easy it would be to compensate the aggrieved party for the loss of the benefit. You would look at how likely it is that the breaching party can and will cure or fix the problem. That will impact the decision on whether we have a material breach. And lastly, the breaching party act in good faith. So what you'll see is that every breach or every potential breach is fact specific and the fact finder, the judge or the jury is going to look at specific facts of the case. So let's talk about what happens if there is a material breach. If there is a material breach, then the party that did not breach, the non-breaching party, can terminate the contract. It means they don't have to keep up their side of it and they can sue for damages under the contract. So it's pretty significant when there is a material breach. What about a non-material breach? It's another type of breach. It is a breach. But obviously, it's not as important. It's often sometimes called minor partial breaches. These are unimportant failures. Such as minor delays or minor deviations from the terms of the contract. One thing to keep in mind about minor delays is that sometimes they can be material. Particularly if the contract says time is of the essence or something similar. If the timeliness of fulfilling the contract is found in the contract, if the importance of that is expressed in the contract, then that may be a material breach. All right. Next, let's talk about the results of a non-material breach. Non-material breach, you can expect the results are not going to be quite as drastic as a material breach. And in fact, with a non-material breach, the non-breaching party still must perform. They still have to hold up their side of the contract. However, they can sue for any damages. So in contrast to material breach where the non-breaching party does not have to perform, the non-material breach, the non-breaching party must perform. Let's take a look at another kind of breach known as anticipatory repudiation or anticipatory breach. This is when a party to a contract makes it clear that their intent is that they will not perform their obligations under the contract. And it can't just be kind of a guess. There has to be an expression or action that pretty clearly establishes that there's a high probability the breach will occur. Let's take a little closer look at anticipatory repudiation or anticipatory breach. You can accomplish anticipatory breach in several ways or anticipatory repudiation. You can do it through express statements, so expressly. You can do it through actions. Certain actions you can take indicate to another person that it's going to be impossible. You can do it through transfer of property to a third party, particularly where we talk about the sale of goods under UCC. If you transfer the property to somebody else then of course you've expressed that you don't intend to carry through the contract with the person you made it. So in essence this results in a material breach and the non-breaching party is excused from performance. It's terminated. Contract is terminated. Keep in mind also that it's possible to retract a repudiation. Retraction of a repudiation is possible. However, there must not have been a material change in the circumstances or in the other person's situation. So there must not be any material change. Why is this concept of anticipatory repudiation or anticipatory breach important? You may be asking yourself. Think about it for a second. The importance of it is mostly to the party who is doing the anticipatory repudiation. Because the party that is the victim of the breach has what is known as a duty to mitigate. They have a duty to mitigate damages. So they can't create more damages by holding to the contract. So for example, if an employee is terminated wrongfully in violation of a contract, the employee can't sit out the term of the contract at home collecting his pay or hoping to collect the money that he was supposed to be paid. He has to mitigate. He has to go out and look for a job. And if he doesn't, the court is not going to give him all his money. Lastly, let's take a look at the impact of the UCC. Because the UCC has some major impact here. You'll recall that the UCC adjusts the common law. Changes the common law. And the situation particularly of the sale of goods. So that unfair or inefficient results are avoided. Well under the UCC there are some adjustments to traditional common law contract. For instance, the buyer has a right of inspection. The buyer has a right of inspection. The goods don't conform to the contract. In essence, if there is some kind of breach, the buyer can reject all. The buyer can accept some and reject the rest. Or the buyer can accept all the goods. The UCC also gives a seller time to cure or fix the problem. They can fix the problem. If the time for delivery is not passed. If the time for delivery is not passed, they can still fix the problem. Now if there's a reasonable question about one party's ability or intent to perform that party's duties under the contract, or the party may demand adequate assurance, adequate assurance of due performance. And if not provided, the party asking for assurances can terminate the contract. So review in this sub-subunit we have defined. In this video we have defined breach of contract. We've looked at different kinds of breaches, different kinds of breaches. We've addressed the impact of material breach and we've addressed the impact of the UCC. And it's a take on the issue of breach and sale of goods.