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BREACH OF OBLIGATION

Contracts are usually made in an effort to formalize an agreement and to protect the parties in the
agreement. A contract will place an obligation on each of the contracting parties. An obligation is a
legal duty to do something or to refrain from doing something.

A contract is a legally binding promise. It is formed when one party offers to do


something, the second party accepts the offer, and each party promises to provide
something of value to the other, such as cash, services, or goods. For example, if
your company offers to buy equipment from a seller for $10,000, and the seller
accepts your offer, there is a contract for the sale of equipment.
Each party to a contract is responsible for fulfilling its terms. The failure to perform
the obligations of a contract is called a breach of contract.

When you enter into a contract you are legally obligated to perform your
contractual dutiesthat is, do what you promised to do in the contract.
Nonperformance is the failure to fulfill your obligations under a contract.
However, you do not have to perform your promises under a contract until
performance is due. For example, if you agree to pay the seller of equipment
on delivery of the equipment, you do not have to pay the seller until the
equipment is delivered. You will not be in breach of the agreement until the
equipment is delivered and you then fail to pay the seller.
But there can be cases where a contract is breached before the time for
performance comes. This occurs when one party decides before performance
is due that he or she will not perform as promised and communicates the
decision to the other party. The second party can sue the first party for
breach of contract even though the time for performance has not arrived.
This is called anticipatory breach of contract
Manner of Non-fulfillment/Breach
1. Total non-fulfillment
- Amounts to non-performance
A material breach of contract (sometimes referred to as a "total" breach), is
serious and gives rise to a cause of action in court. A material breach goes to
the very heart of the contract. It renders the contract "irreparably broken"
and defeats the purpose for making it in the first place. For example,
suppose your company agrees to pay a violinist $500 to play at a companyhosted event, but the violinist shows up at the party without his violin. The
violinist has materially breached the contract to perform if he cannot play.

When there is a material breach of contract, the injured party can go to court
and seek damagesa money payment adequate to cover economic losses
resulting from the breach. A total breach of contact will also usually
terminate the nonbreaching partys duty to perform any of the promises he
or she made in the contract. For example, your company would have no legal
duty to pay the violinist who couldnt play as promised.

For example, let's look at our contract again. Let's say that I deliver the roses the morning of your
wedding, but they are all too wilted for you to use. You call another florist and have last minute roses
delivered, and you pay that florist $1,200.
You never paid my bill for $1,200. We argue the matter, and eventually, you sue me in court for
breach of contract. The court agrees with you. The court rules that the wilted roses were unusable
and that I breached the contract by not delivering fresh, usable roses. The court excuses you from
any obligations under the contract. This means you don't have to pay me anything.
I completed my obligation under the contract, but I completed the contract in a faulty manner. The
duty to supply you with usable roses is significant enough that it causes the rest of the contract to
fail.

2. Partial non-fulfillment
- A part is performed
- Non-fulfillment occurs either at the very moment of the demand (ordinary
breach) or before the maturity of the obligation (anticipatory breach)
. Let's say that I deliver the roses, and you pay me the full amount, which is $1,200. After I leave, you
discover that one dozen is too wilted for you to use. We argue the matter, and eventually, you sue me
in court for breach of contract. The court agrees with you, and I'm ordered to refund your money for
one dozen roses. Your remedy is a cash payment, from me to you, for $12.
I only breached a portion of the contract. I fulfilled your order for the majority of the contract. This is a
partial breach, and you'll be compensated with a right to damages, or payment, for only the portion of
the contract that I breached.
An anticipatory breach gives the non-breaching party the option to treat such a breach as immediate,
and, if repudiatory, to terminate the contract and sue for damages (without waiting for the breach to
actually take place). For example, A contracts with B on January 1 to sell 500 quintals of wheat and
to deliver it on May 1. Subsequently, on April 15 A writes to B and says that he will not deliver the

wheat. B may immediately consider the breach to have occurred and file a suit for damages for the
scheduled performance, even though A has until May 1 to perform.
Example: if Company A refuses to pay substantial interim payments to Company B, Company B can
begin legal action due to anticipatory breach. Company B could also stop performing its contractual
obligation, potentially saving time and or money.

Jane agrees to sell her antique sewing machine to Amanda, and the
two agree on the purchase price of $1,000, the sale to occur on May
1st. On April 25th, Amanda tells Jane that she cannot come up with
the money on time. Following this communication, Jane can
reasonably assume that Amanda is in anticipatory breach. This
enables Jane to sell the sewing machine to someone else, or
potentially file a lawsuit against Amanda for breach of contract.

Kinds of Breach
1. Voluntary
- Arises from the modes of breach
- Debtor is liable for damages
2. Non-voluntary
- Arises from fortuitous events
- Debtor is not liable for damages
Modes of Breach
Article 1170. Those who in the performance of their obligations are guilty of
FRAUD, NEGLIGENCE, or DELAY and those who in any manner
CONTRAVENE THE TENOR thereof, are liable for damages.
General rule: in cases where there is voluntary breach of obligation, one of the
rights of the creditor is to ask for indemnification of damages under this article.

1. Contravention of the tenor of obligation


- Kind of voluntary breach of obligation or partial non-fulfillment of obligation

Any illicit act which impairs the strict and faithful fulfillment of the obligation
or every kind of defective performance.

The obligations agreed upon must be complied with in good faith. Hence, if the
obligation is not performed according to the tenor of the contract, the party at fault may
be held liable for breach of obligations.

2. Fraud (Dolo)
- Voluntary execution of a wrongful act, or a willful omission, knowing and
intending the effects which naturally and necessarily arise from such act or
omission.
Kinds of Fraud
1. Fraud in the Performance
2. Fraud in the execution/creation/birth of contract
a. Dolo causante
- fraud in the execution of the contract
b. Dolo incidente
- fraud in performance of obligation already existing because of a contract