Contract disputes and breach of contract claims for businesses

Economic uncertainty, complex supply chains and expanding legal obligations mean UK businesses face a growing risk of contractual disputes. Understanding how breach of contract claims arise, and how to respond, is essential to protecting finances, operations and reputation.

Why contractual disputes are increasing for businesses

A recent FSB report found that around 70% of UK SMEs have faced a commercial dispute, with contractual issues the most common source. Government-backed research from the Legal Services Board shows that when these disputes remain unresolved, they are more likely to escalate into formal legal action.

Businesses are also increasingly willing to pursue legal remedies rather than absorb losses. At the same time, expanding obligations around governance, directors’ duties and ESG continue to create additional exposure to claims.

Contracts, whether formal or informal, underpin almost every business relationship, from supplier agreements to joint ventures. When things go wrong, breaches can lead to financial loss, operational disruption and reputational damage.

Our litigation solicitors act for companies, directors and shareholders across a wide range of commercial disputes. We advise both claimants and defendants, providing clear, strategic guidance on contract enforcement, dispute resolution and risk management.

What constitutes a breach of contract under UK law

A breach of contract occurs when one party fails to perform a contractual obligation without a lawful excuse. Common examples include:

• Failing to deliver goods or services on time.
• Providing defective or substandard goods or services.
• Refusing or failing to pay sums due.
• Acting inconsistently with agreed obligations, such as cooperation or exclusivity.

A breach does not need to be deliberate. Many disputes arise because contractual terms were unclear, incomplete or poorly documented, particularly in fast-moving commercial relationships or long-standing arrangements built on trust.

Identifying whether a breach has occurred and assessing its seriousness is the first step in deciding what action may be available.

The most common breach of contract claims affecting SMEs

While every dispute turns on its facts, certain breach of contract claims arise repeatedly for small and medium-sized businesses:

1. Non-performance - Failure to deliver goods or services as agreed.
    
2. Late or non-payment - Failure to pay invoices on time or in full, including disputes over payment milestones.
    
3. Breach of express terms - Ignoring clearly stated obligations such as deadlines, quality standards or exclusivity clauses.
    
4. Breach of implied terms - Supplying goods or services that are not of satisfactory quality or fit for purpose.
    
5. Termination disputes - Disagreement over whether a contract was lawfully terminated or whether termination rights were triggered.
    
6. Failure to cooperate or act in good faith - Conduct that undermines agreed collaboration or partnership arrangements.
    
7. Misrepresentation or fraud - Entering into a contract based on false or misleading statements.

For SMEs and family-owned businesses, these disputes often arise not from bad faith, but from contracts that fail to clearly define rights, responsibilities and limits.

Case example: breach of express terms in Matière SAS v ABM Precast Solutions Ltd (2025)

Matière SAS and ABM Precast Solutions Ltd agreed to work together on a joint bid for a subcontract. Their agreement included an express obligation to cooperate and collaborate in good faith.

Matière proposed using an alternative factory without consulting ABM, undermining the joint arrangement. The court held that this conduct breached the express duty to act in good faith. Although no financial loss was proven, the case confirmed that broadly worded express obligations can still be legally enforceable.

Case example: breach of implied terms in Messer UK Ltd v Britvic Soft Drinks Ltd (2002)

Messer UK Ltd supplied carbon dioxide to Britvic Soft Drinks for use in beverages. The CO₂ was contaminated with benzene, albeit at levels below those considered harmful to health.

The court held that Messer was in breach of the implied terms under section 14 of the Sale of Goods Act 1979, which require goods to be of satisfactory quality and fit for purpose. Compliance with regulatory thresholds alone did not excuse the breach.

Why these cases matter for businesses

These cases demonstrate that contractual risk does not arise only from obvious or deliberate breaches. Broad express terms, implied statutory obligations, and informal expectations can all give rise to claims.

For SMEs, family-owned businesses and growing commercial ventures, disputes often arise because contracts do not clearly allocate risk or anticipate how relationships may evolve. Early legal advice and carefully drafted agreements can help prevent misunderstandings, reduce exposure to claims and provide certainty if a dispute arises.

Breach of contract remedies and defences explained

Not every breach entitles the innocent party to terminate a contract or claim damages. Breaches are classified by severity, and that classification determines what remedies may be available.

Types of breach of contract

Breach of contract can take several forms, depending on how the agreement has been drafted and how the parties have performed their obligations.

1. Minor breach - A technical or non-essential failure that does not affect the core purpose of the contract.
    
2. Material breach - A serious failure going to the heart of the contract, potentially allowing damages and termination.
    
3. Repudiatory breach - Conduct clearly indicates that one party will not perform its contractual obligations, allowing immediate termination and a claim for losses.

The type of breach will often determine the remedies available and whether the contract can be brought to an end.

Available remedies

• Damages for financial losses caused by the breach.
• Specific performance requiring obligations to be fulfilled.
• Injunctions preventing ongoing or future breaches.
• Termination of the contract with a claim for resulting losses.

Contract law is compensatory rather than punitive. A claimant must prove causation, foreseeability and that reasonable steps were taken to mitigate losses.

Defending a breach of contract claim

Possible defences include showing that no breach occurred, the breach was not sufficiently serious, the other party contributed to the loss, the contract was varied or terminated, or the claim is out of time under the Limitation Act 1980.

FAQs on breach of contract

Below are answers to some of the issues businesses most often raise when dealing with a potential breach of contract claim.

1. What is the first step in bringing a breach of contract claim?

   Gather evidence of the breach and losses, identify the relevant contractual terms and confirm your own compliance.

2. How long do I have to make a claim?
   
   Generally, six years from the date of breach, subject to limited exceptions.
    
3. What remedies are available?
   
   Damages, specific performance, injunctions, restitution or rescission, depending on the circumstances.
    
4. What should I consider before bringing a claim?
   
   Cost, time, publicity, and the impact on commercial relationships.
    
5. How must losses be mitigated?
   
   Reasonable steps only. Businesses are not required to take uncommercial or risky action.

Expert guidance from our litigation solicitors

Breach of contract disputes can raise complex legal and commercial issues, making early, informed advice essential.

Bhavini Kalaria, solicitor and head of commercial litigation, comments:

“The importance of seeking legal advice early cannot be understated. It improves prospects of success and reduces exposure to counterclaims. Courts expect professionalism, compliance with procedural rules and a genuine willingness to resolve disputes. Failure to follow notice and dispute clauses can undermine a claim and impact costs.”

From high-value commercial disputes to smaller contractual disagreements, our team provides practical, results-focused advice tailored to your business objectives. Get in touch to speak with our litigation solicitors.

Bhavini and our London litigation solicitors are based at Lincoln’s Inn Fields, in the heart of the legal district and within a short walk of the Royal Courts of Justice. Through our London office and our wider network, we support businesses nationwide.