Breach of Contract
When people or businesses enter into contracts, they typically expect that things will run smoothly, both sides will be pleased and no disputes will happen. Unfortunately, this is not always the case. Goods or services are not always as promised, payment isn’t made as it is supposed to be, or a myriad of other failures to comply with the terms of the contract occur. The following is a discussion of the legal concept of “breach of contract” and some of your options should such a breach occur.
What Should I Do If I Have a Contract Dispute With Another Business?
You should first review the contract very carefully. The contract may contain clauses that dictate how you should handle a dispute, what claims are allowed to be made, what types of damages are recoverable, whether the party that is in breach must be afforded an opportunity to “cure” or correct their breach and many other important details. Business dispute lawyers read contracts all the time and can help you navigate the issues in how to assert – or defend against – a breach of contract claim.
Is Your First Step Mediation, Arbitration or the Court System?
If informal attempts at resolution fail, you will need to determine if the claim must proceed in an arbitration, mediation or in the court system. Filing a lawsuit in the court system is the most common method to resolve contract disputes and enforce contracts. Sometimes, however, the parties have agreed to require a mediation before a lawsuit can be filed. In a mediation, the parties are present along with a neutral mediator, often a lawyer. Mediation is not binding – the mediation simply helps the parties try to resolve the dispute.
Sometimes the contract requires arbitration, where the two disputing parties sit down with a third neutral party, known as an arbitrator. The arbitrator listens to the disputing parties’ problems and arguments and then decides on a resolution for the disputing parties. The arbitrator’s decision is most often binding.
If the contract does not require mediation or arbitration, then a lawsuit will need to be filed if no resolution is possible between the parties. The case will be assigned to a specific court, and litigation will begin.
Elements of a Breach of Contract Claim
Most breach of contract claims involve three basic elements of proof:
- Valid Contract: Only valid contracts are enforceable. Illegal contracts or contracts that weren’t formed properly cannot be enforced in court. For example, most often the contract must be signed by the party against whom the contract is sought to be enforced.
- Breach of Contract Terms: In order to recover on your claim, you must prove that there was a material violation of the contract terms. Technical violations or minor shortcomings generally won’t qualify as a breach.
- Damages: You must be able to prove your losses to a reasonable degree of certainty. Although many lawsuits result in a monetary damages award, courts can sometimes order other remedies known as equitable remedies.
Monetary damages are generally divided into two categories: direct and consequential. Direct damages are those damages that naturally and necessarily occur when one party fails to comply with contractual obligations. Generally, the part who suffers a breach of contract may obtain as direct damages the “benefit of the bargain” – or what that party would have received under the contract had it not been breached. Consequential damages are those that are not a direct result of the breach but as a consequence of the breach. For example, perhaps business was lost from other sources as a result of the breach. Some contracts provide that consequential damages are not recoverable as a remedy for a breach. You may also have a claim for liquidated damages or quantum meruit damages. Liquidated damages are specified by a contract provision which states specifically what a party may recover if the contract is breach. The law will allow the recovery of the liquidated damages amount unless it is held to be an illegal penalty. Quantum meruit damages may be recovered if the contract is unenforceable or void. They serve to return the damaged party to the position it would have been in if no contract had been made and are typically calculated as the reasonable value of the work performed or materials furnished.
What are Equitable Remedies for Breaches of Contract?
Equitable remedies generally do not involve monetary payments to the party suffering the breach. They require that the parties take some form of action. There are several different equitable remedies possible in breach of contract cases including the following:
- Specific Performance – requires the breaching party to fulfill their part of the bargain.
- Rescission – cancels the previous contract and replaces it with a new one.
- Restitution – puts the non-breaching party back in the position it was in before the breach.
- Reformation – rewrites or revises the existing contract in order to better meet the parties’ requirements.
Are There Any Defenses to a Claim of Breach of Contract?
There are many defenses to a breach of contract claim. Some of the most common are:
- Fraud in the Inducement / Misrepresentation. The contract may not be enforceable if it was made under conditions such as fraud, deceit or lying.
- Duress (Coercion/Undue Influence). Relief may not be available if one party took advantage of the other or unduly pressured or threatened the other party.
- Unconscionability: A contract may be declared void if it is unconscionable or so one-sided that it’s unfair to one party.
- Unclean Hands: The party claiming relief also breached the contract.
- Laches: The non-breaching party intentionally delayed in bringing forth a lawsuit for the breach of contract which resulted in prejudice to the breaching party.
Spencer Scott, pllc Can Help You Decide How to Respond to a Breach of Contract and Can Litigate For You.
The attorneys at Spencer Scott have litigated hundreds of breach of contract lawsuits during their combined 59 years. They can explain the provisions of the contract to you and help you determine if there has been a breach. Spencer Scott has represented both the party accused of a breach and the party suffering a breach by the other side. They are experienced trial lawyers and can help you from beginning to end of a breach of contract lawsuit. For more information on Spencer Scott’s experience with lawsuits and arbitrations in which breach of contract is allowed, please click here for Jennifer Spencer’s bio; here for Mary Scott’s bio; or here for their experience with all business disputes.