Contract Breach And Performance
This page explains what constitutes a contract breach in Australia, how courts assess performance failures, and when enforcement action may be warranted.
Written by: Mark Lazarus, Commercial Lawyer, Director of Lazarus Legal
Last updated: 02 January 2026
Legal Disclaimer: The information on this page is general in nature and is not intended to constitute legal advice. It does not take into account your personal circumstances. Laws and legal processes can change, and their application varies between cases. You should seek independent legal advice before acting on any information on this page.
Contract Breach And Performance
A contract breach occurs when a party fails to perform its obligations under an agreement. Whether you’re dealing with delayed delivery, defective work, or non-payment, understanding when performance falls short matters before disputes escalate or remedies are pursued.
Australian courts assess contract breach by reference to what the contract requires, not just technical failures or disappointments. This page explains how performance and breach work under Australian contract law and when enforcement action may be warranted.
Defining Performance and Breach of Contract
Understanding contract breach requires understanding performance first. These two concepts work together: performance is the baseline, and breach is what happens when that baseline isn’t met.
Performance
Performance in Australian contract law means carrying out the terms you agreed to under a contract. Courts assess performance by reference to express terms, implied terms, and the time, quality, and manner specified or expected.
- Complete performance means fulfilling every obligation exactly as agreed.
- Substantial performance means delivering most of what was required, with only minor deviations.
- Defective or incomplete performance means obligations were attempted but fall short in material ways.
Performance is the baseline against which breach is measured.
Breach
A contract breach occurs when a party fails to perform its contractual obligations without lawful excuse. Breach arises when someone doesn’t do what they’re required to do, whether that’s delivering goods, completing services, making payment, or meeting confidentiality obligations.
Not every failure amounts to a legally actionable breach. Minor deviations may not give rise to termination rights or significant damages. Major or repudiatory breaches may entitle the innocent party to end the contract and claim compensation. Consequences depend on the seriousness of the failure, the contract’s wording, and the loss suffered.
Common Types of Contract Breach
Breach of contract takes various forms depending on what obligations were promised and how they were broken. The most common types seen in Australian commercial context include the following:
- Failure to perform obligations entirely. One party doesn't deliver what was agreed. A supplier who never ships ordered goods or a contractor who abandons a project mid-way commits this type of breach.
- Late performance. Obligations are fulfilled but not within the timeframe specified or reasonably expected. Whether delay constitutes breach depends on whether time was made essential under the contract and how long the delay lasts.
- Defective or non-conforming performance. The work was done or goods delivered, but they don't meet the agreed standard or specifications. A builder who completes construction using substandard materials or a manufacturer who delivers products that fail quality tests commits this breach.
- Breach of ancillary obligations. Violations of confidentiality clauses, exclusivity agreements, non-compete restraints, or ongoing obligations like insurance requirements or record-keeping duties. These breaches may not stop the main contract from functioning but still carry legal consequences.
How Courts Assess Performance And Breach
Australian courts interpret contractual obligations by reading the contract as a whole, considering the parties’ intentions when they entered the agreement, and examining whether the breach goes to the root of what was promised.
Contract wording controls the analysis. Courts look at what was actually agreed in writing, not what parties wish they’d agreed or what seems fair in hindsight. Unclear terms may be interpreted against the party who drafted them.
Context and conduct matter alongside the written terms. How parties behaved before signing, how they performed initially, and what they communicated during disputes can all inform whether a contract breach occurred and how serious it is.
Evidence and documentation often determine outcomes in breach disputes. Emails, invoices, delivery records, payment histories, and witness accounts help establish what was required, whether it was performed, and what loss resulted. Technical non-compliance without real harm may not justify termination or substantial damages. Courts assess contract breach practically, not just mechanically.
Real-World Examples Of Contract Breach
Contract breach disputes often arise in predictable commercial and employment scenarios. The following examples illustrate how breach principles apply in practice and what parties should consider before pursuing enforcement action.
Breaches in Buyer and Seller Agreements
Sellers often face situations where buyers fail to complete purchases after entering binding agreements. A buyer might withdraw from a property sale after contracts are exchanged, refuse to accept delivery of custom-manufactured goods, or simply stop paying instalments under a payment plan.
Can a seller sue a buyer for breach of contract? Yes, sellers can sue buyers for breach when the buyer fails to perform obligations under a binding agreement. Whether the seller has strong grounds depends on whether a binding contract existed, what the buyer was required to do, whether the buyer actually breached those requirements, and what financial loss the seller suffered.
Sellers who can’t prove loss or damages may have limited practical remedies even if technical breach occurred.
Breaches in Employment Contracts
Employers sometimes face situations where employees breach contractual obligations beyond simply resigning or performing poorly. An employee might join a direct competitor immediately after leaving despite signing a restraint clause, disclose confidential client lists or pricing information to third parties, or abandon their role without providing contractual notice during a critical project phase.
Can an employer sue an employee for breach of contract? Yes, employers can sue employees for breach of employment contract in specific circumstances, though this is less common than employees bringing claims against employers. Courts scrutinise restraint clauses in employment contracts and may refuse to enforce them if unreasonable. Employers must also prove actual loss caused by the contract breach, which can be difficult for non-solicitation or confidentiality violations. Many employers choose alternative responses like seeking injunctions rather than pursuing damages through litigation.
Breaches in Service Provider Agreements
Service providers frequently face breach situations when clients fail to pay invoices under agreed payment terms or stop responding mid-project. A client might refuse to pay for completed work claiming dissatisfaction with quality, abandon a project after the provider has invested significant resources in setup and planning, or demand additional work beyond the scope without agreeing to additional fees.
Can a service provider terminate for non-payment? Yes, but whether a service provider can terminate the contract for non-payment depends on what the contract says about payment timing, whether payment is a condition of ongoing service, and whether proper notice procedures have been followed. Simply stopping work without following contractual termination procedures can put the service provider in breach themselves, even if the client owes money.
Most commercial service agreements include staged payment terms, suspension rights for overdue accounts, and termination clauses triggered after specific notice periods. Providers who terminate properly can claim unpaid fees and damages. Those who terminate improperly may lose the right to payment entirely and face counter-claims for incomplete work.
Remedies For Contract Breach
Remedies for breach of contract under Australian law aim to address the loss suffered by the innocent party or protect their contractual expectations. Courts determine available remedies based on the seriousness of the contract breach, the type of obligation violated, and the circumstances surrounding the failure.
Damages
This is typically monetary compensation for financial loss caused by the breach. Courts calculate damages to put the innocent party in the position they would have been in had the contract been performed properly.
Specific Performance
This happens when a court order requires the breaching party to complete what they promised under the contract. This remedy is typically reserved for unique subject matter like land or rare goods where damages are inadequate.
Injunctions
These are court orders preventing ongoing or threatened breaches. Injunctions can stop a party from violating confidentiality obligations, restraint clauses, or exclusive dealing terms.
Restitution (quantum meruit)
This pertains to recovery for the value of work done or benefits conferred when a contract fails or is terminated. This prevents unjust enrichment where one party has received value without paying for it.
Account of profits
In certain breach situations, particularly involving fiduciary duties or intellectual property rights, courts may order the breaching party to hand over profits they gained from the breach.
Debt Claims
This refers to the recovery of unpaid amounts owed under the contract, such as outstanding invoices or fees for completed work.
Termination Of Contract
Termination may be available following a serious contract breach that goes to the root of the contract or when the contract itself includes termination rights triggered by specific failures.
Terminating a contract ends future obligations but doesn’t erase what happened before termination. The innocent party may still claim damages for loss suffered up to that point. However, terminating when you don’t have the legal right to do so puts you in breach yourself.
Wrongful termination creates significant legal and financial risk. Before terminating over alleged contract breach, parties should assess whether the breach is serious enough to justify ending the contract, whether contractual termination procedures have been followed, and whether continuing performance might be the safer option. Termination decisions should be made carefully and typically with legal advice rather than in the heat of dispute.
When To Get Legal Advice For Contract Breach
Early legal advice can prevent escalation when performance issues emerge or when you suspect the other party may be in breach. Delay in addressing breach can limit your remedies or strengthen the other party’s position. Acting too quickly without proper advice can put you in breach yourself, particularly if you withhold payment or terminate without clear grounds.
Legal advice becomes particularly important before terminating a contract, commencing court proceedings, or responding to breach allegations made against you. A lawyer can assess whether contract breach actually occurred, what remedies you may have, and whether the contract’s terms support the action you’re considering. Many breach disputes settle once parties understand their legal positions rather than proceeding to litigation.
Summary
- Contract breach occurs when a party fails to perform contractual obligations without lawful excuse.
- Performance is assessed by express terms, implied terms, and the time, quality, and manner specified in the agreement.
- Not every failure amounts to legally actionable breach. Courts distinguish between minor breaches and major/repudiatory breaches.
- Common breach types include failure to perform entirely, late performance, defective/non-conforming performance, and breach of ancillary obligations.
- Courts assess breach by examining contract wording, parties’ intentions, whether the breach goes to the root of the contract, and available evidence.
- Available remedies include damages, specific performance, injunctions, restitution/quantum meruit, account of profits, and debt claims.
- Termination ends future obligations but carries risks if done without proper legal grounds.
- Early legal advice can prevent escalation and clarify legal positions before disputes intensify.
About Mark Lazarus – Director, Lazarus Legal
Admitted in both Australia and the UK, Mark brings more than two decades of global legal experience to Lazarus Legal. Having worked as a barrister, in private practice, and as in-house counsel for a major international consumer brand he combines courtroom-honed advocacy with commercial insight. Specialising in commercial law, intellectual property and dispute resolution, Mark advises startups, creative businesses, and established enterprises on transactions, trademarks, contract drafting, and litigation strategy. His cross-jurisdictional background and history as a former in-house legal director give clients confidence that their legal issues will be managed with both strategic foresight and commercial realism.