“In Default” and “Breach” in Contract Law

"In Default" and "Breach" in Contract LawIn general legal terminology, there isn’t much difference between a breach of contract and being in default. Both terms indicate that a party has failed to fulfill their contractual obligations. However, in contract writing, precise definitions are often provided for terms that might not be commonly used in everyday business.

The term “default” frequently appears in real estate transactions. It usually refers to a borrower failing to make payments. A typical example of default is not adhering to the payment terms of a loan.

In real estate contracts, a default occurs when either the buyer or the seller does not comply with the contract’s terms and conditions. Default typically happens when the contract’s conditions have been met. While defaulting is not illegal, it requires valid justifications or contingencies.

Deliberate Default and Willful Misconduct

When determining damages for an injured party, judges consider the contract’s limitation of liability clause, which does not apply in cases of “willful misconduct” or “deliberate default.” Willful misconduct occurs when someone intentionally violates company policy or acts recklessly. Deliberate default, however, refers to a conscious decision to default, knowing that the action constitutes a default. While deliberate default is intentional, it is less severe than willful misconduct as it does not involve recklessness.

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