Breach of Contract Clause: Notice, Cure & Remedies

The breach of contract clause outlines the consequences that will result if one party fails to meet its obligations under the agreement. A breach of contract occurs when one party fails to fulfill its obligations under the contract without a valid reason.

Usually embedded in the Default / Remedies section, or broken out as separate “Event of Default,” “Material Breach,” and “Cure” paragraphs, the clause:

• Defines breach levels (minor vs material, chronic vs single-event).
• Requires formal notice and cure periods for non-material defaults.
• Triggers liquidated damages or service-credit mechanisms.
• Aligns with termination rights and any limitation-of-liability caps.
• References specific performance language when money isn’t enough (e.g., IP or confidentiality breaches).

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A well-drafted breach of contract clause typically contains:

1. Notice of Breach: The non-breaching party must provide notice to the breaching party of the breach, including specific details of the breach.‍
2. Definition of Breach: Clearly specifying what actions or inactions by a party constitute a material breach, such as failure to perform, late delivery, or non-payment.
3. Notice and Cure Period: The clause may include a cure period, which gives the breaching party an opportunity to correct the breach within a specified timeframe.‍
4. Termination: If the breach is not cured within the cure period, the non-breaching party may have the right to terminate the contract.‍
5. Damages: The clause may also specify the damages that the non-breaching party is entitled to receive as a result of the breach, such as compensation for any losses or expenses incurred as a result of the breach.
6. Limitations of Liability: Capping or excluding certain types of damages, such as consequential or punitive damages.‍
7. Other Remedies: The clause may include other remedies that are available to the non-breaching party, such as injunctive relief or specific performance.
8. Dispute Resolution: Outlining the process for resolving disputes related to alleged breaches, such as negotiation, mediation, or arbitration.

Sample language:

• Construction Contract: "If the Contractor fails to perform the Work in accordance with the Contract Documents, such failure shall constitute a material breach of this Contract. Upon such breach, the Owner may, after providing the Contractor with written notice and a ten (10) day cure period, terminate the Contract and pursue any remedies available at law or in equity."
• Software Licensing Agreement: "If either party materially breaches any term of this Agreement and fails to cure such breach within thirty (30) days after receipt of written notice, the non-breaching party may terminate this Agreement immediately upon further written notice and seek damages, including reasonable attorneys' fees and costs."

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Contract types where a breach clause is critical:

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Drafting notes for breach clause:

• Clear Breach Definitions: Ensuring that the clause clearly and objectively defines what constitutes a material breach, avoiding ambiguity or subjective interpretations.
• Proportionality of Remedies: Evaluating whether the specified remedies are reasonable and proportionate to the potential breaches, and aligning with the parties' intentions and industry practices.
• Notice and Cure Periods: Assessing the adequacy of notice requirements and cure periods to allow for potential remediation before escalating to more severe consequences.
• Interaction with Other Clauses: Analyzing how the Breach of Contract Clause interacts with other provisions, such as limitation of liability, indemnification, or termination clauses.
• Enforceability and Governing Law: Ensuring that the remedies and procedures outlined in the clause are legally enforceable under the governing law and jurisdiction.

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Drafting checklist:

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Bottomline:

A Breach of Contract Clause sets the rules for what constitutes a breach, how the injured party must give notice, the time allowed to fix the problem (cure), and the remedies - money damages, termination, or equitable relief - available if the breach persists.