Future Business Leaders of America (FBLA) Business Law Practice Exam

What does breach of contract refer to?

1. Failure to execute a contract properly

2. Signing a contract under duress

3. Failure to perform according to the contract

4. Mutual agreement to terminate a contract

The correct answer is: Failure to perform according to the contract

Breach of contract specifically refers to the failure to perform according to the terms outlined in a contract. This means that one party has not fulfilled their obligations as agreed upon, whether by not completing a task, not delivering goods, or failing to make payments as stipulated in the contract. Such a breach can be classified as either an "actual breach," where the terms are not followed, or a "anticipatory breach," where one party indicates they will not fulfill their duties before the performance is due. The other options do not accurately define a breach of contract. Executing a contract improperly may lead to issues regarding that contract, but it does not constitute a breach of the contractual obligations themselves. Signing a contract under duress addresses the circumstances under which a contract was signed, which could render the contract voidable rather than indicative of a breach. A mutual agreement to terminate a contract involves the parties deciding to end the contract together, which is often a legitimate and permissible action in contract law, separate from the concept of breach. Thus, the correct understanding of breach of contract focuses on the failure to perform as agreed.