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Breach of Contract Lawyers & A Playbook For Legal Action
Business Contracts are an essential part of operations in many industries, from landscaping companies to travel nurses or medical staff working with different hospitals. However, as standard as contracts are, they don’t always go according to plan. For example, there could be confusion about a specific clause, or perhaps another party involved in a contract refused to hold up their part of the agreement.
While we hope you’re never in this situation, it’s essential to know what to do if something like this happens to you. Whether a minor contract regarding a home improvement project or a significant business contract, it’s worth it to be prepared for anything with a plan on how you want to respond.
It’s imperative to enter into any contract with an understanding of 3 key things:
- What is a breach of contract?
- What are the different types of breaches of contract?
- What your course of action should be when entering into a contract
What Is a Breach of Contract?
Let’s begin with understanding precisely what a breach of contract is and what it is not. A breach of contract occurs when one party refuses to follow through with the contract they signed. While this may seem straightforward, there are many ways a breach of contract can become more ambiguous than you may expect. A breach of contract encompasses several scenarios, including but not limited to the following:
- Refusal to pay the agreed-upon price for a service
- Failure to provide the agreed-upon service or product
- Late completion of a service or delivery of a product
Here is an example of a contract: a business owner hires a marketing agency to develop a new website. Under the contract, the agency agrees to finish the website within a given timeline and for a specific cost.
In this example, both parties are responsible for their end of the contract: the marketing company for building the specified website and the business owner for paying. Therefore, failure on either end could constitute a breach of contract. While there are many types of contract breaches more or less severe than this, it’s important to note that a breach of any legally binding contract is a serious issue.
Dates Matter in Breach of Contract
Even a fulfilled contract could be breached if it were completed late. Let’s say our hypothetical marketing company completed the website six months after the date stated in the contract. Technically the contract was fulfilled, but it was not done within the agreed-upon timeline.
Most contracts have clauses meant to account for any unpredictable roadblocks. With dates, the contract may allow for “reasonable extensions,” and it will be up to the court to decide the validity and intent behind these phrases. Courts look at past contracts, general industry standards, and societal expectations when assessing the meaning behind vague phrases.
Types of Contract Breaches
Contract breaches come in a lot of different forms. First, the breach may be minor or material. Second, it may be an actual breach or an anticipatory breach. Let’s review the differences between these types of contract breaches and what they mean for outcomes.
Minor Breach
This is the formal name for the date example we just discussed. Not receiving a product or service by the agreed-upon date may be considered a minor breach of contract because even though it technically doesn’t fall within the original contract’s rules. However, if that breach had any consequential damages to the parties involved then it may be a material breach.
Material Breach
A material breach refers to receiving the wrong product or service altogether. In these cases, unlike the item being slightly late, it may have actual damages for other parties involved and thus is treated as a more serious breach of contract.
Actual Breach
This means the breach has already happened. The product or service was not delivered or was not received on time.
Anticipatory Breach
If a party states in advance that they will not be honoring all or part of a contract, that is an anticipatory breach. Even though the contract hasn’t officially been breached yet, it is expected and has been communicated that a breach will happen.
It is possible for a minor breach to be an actual breach and, thus, be a minor actual breach. It’s also possible that a minor breach could be an anticipatory breach, making it a minor anticipatory breach.
Regardless of the type of breach of contract you are dealing with, it’s important to be aware of what your options for legal action are. Even if you don’t plan to use them, knowing they are there can help bring you peace of mind about the situation as a whole. A team of contract attorneys can help you develop a game plan so that, no matter what happens, you’re ready for what is ahead.
What is Not a Breach of Contract?
While there are many forms of breach of contract, there are a few ways a breach of contract will be considered null and void. This includes:
The court will assess the contract itself to ensure it was not fraudulent. Fraudulence within the contract, whether intentional or not, can be grounds for dismissing a breach of contract case or ruling in favor of the defendant.
The contract could be considered invalid if later modifications are deemed responsible for the breach. For example, our distressed business owner suddenly requested a major change of direction on their website, throwing a wrench into the marketing agency’s plans.
If the defendant can prove that they were forced to sign the contract under mental or physical pressure, a breach of contract may be deemed acceptable.
If the contract contains mistakes, it may be rendered invalid. For example, our business owner and marketing company agreed to complete the website by the end of May, but the contract said February 1.
Accord and satisfaction occur when both parties have already agreed to compensate the contract terms. You may not seek breach of contract damages if you have already accepted compensation.
A contract wherein one or more parties do not have a stated obligation is unenforceable.
Here are the other most common defenses against a breach of contract suit that you should be aware of:
- Outside influence has rendered the contract undoable
- The contract contains illegal activities or violates a public policy
- Agreements for loss payments are already included in the contract
- Any party involved in the contract was unable to consent legally
Misconceptions About a Breach of Contract
You might be surprised by what aspects of a contract are enforceable.
Liquidated Damages Are Always Imposed
Liquidated damages are a common aspect of many contracts intended to give value to real but nebulous losses. The restaurant failing to pay the construction company the agreed-upon price for their services is easy. Still, if the marketing company is the one who breaches the contract, determining the “value” of the undelivered website is much harder.
In cases like these, the contract will likely have a section for “liquidated damages,” which gives a monetary value to the concept of the patio. Since it’s written in the contract, it may seem like an open and shut case. Still, courts will often throw these damages out if they are considered punitive (i.e., intended as punishment for breach of contract dispute rather than actual recoupment of losses). Liquidated damages aren’t a given, so it’s important to consider how enforceable this section of your contract is (if there is one).
All Contracts Must Be Written
It is possible to sue for the breach of an oral contract, though these cases often face a steep uphill battle. For an oral contract to be considered valid, it must contain the same basic elements as a written contract, including:
- An Offer
The verbal contract must have a clear offer made by at least one party.
- Acceptance
All parties must accept the oral contract for it to be enforceable.
- Understanding
Each party must understand that a contract has been made and be able to consent to its terms legally. Thus, it would be impossible to enforce the terms of a verbal contract with someone underage or mentally incapacitated.
- Consideration
Consideration usually refers to money but can mean anything that two or more parties exchange. Consideration must come from all sides; a contract where only one party is responsible for providing a service, product, or money is not considered a valid contract.
Additional requirements regarding which contracts can be enforced verbally will vary by state, so look into your state’s specific requirements.
What To Do If Someone Breaches A Contract With You
Someone breaching a contract with you may leave you feeling overwhelmed. Your expectations were not met, you may be on the hook for their failure to come through, and that stress alone can make it hard to know where to go next. That’s why we have provided the following guidelines for what action steps you should take if someone breaches a contract with you. Please note we recommend talking with your attorney to ensure you are protected before taking action. The things you say or do could potentially harm your case later on.
Depending on the nature of the breach, it may be worthwhile to sit down with the other party and ensure the current contract is still applicable and profitable for everyone. While this may be an uncomfortable conversation, it’s an important place to start to make sure everyone is on the same page about whether the contract is still beneficial and where you want it to go from here.
In some cases, a mutually beneficial agreement can be reached that will compensate you for the breach of contract while remaining fair to all other parties. Engaging in alternative dispute resolution methods (ADR) can save you time, money, and hassle.
Mediation and arbitration do not always require legal representation, but some instances – like those involving property rights – may warrant legal counsel.
If you cannot reach an agreement, your next step is to find legal representation. An experienced legal team can guide you through the next steps in the process. If you’re unsure of what the next steps may look like as you pursue legal action, a strategy session can be a great place to start. This allows you to ask an experienced lawyer any questions and develop a customized game plan for what to do next.
The key component here is determining whether a lawsuit is viable for you. Once potential damages are calculated, you can make an informed decision about whether or not to pursue legal action.
How Much Does A Breach Of Contract Lawyer Cost?
If you are looking to claim a breach of contract, hiring a lawyer may be the best course of action. A lawyer can help discern your contract and determine the next steps toward compensation. While it depends on the case, you will most likely look to hire a civil litigation attorney.
The cost of a contract lawyer will depend on the case, the law firm you choose, and the expertise you are looking for in a lawyer. The average cost of a lawyer will usually range from $300 to $750 per hour.
Other fees that may contribute to the overall cost of a breach of contract lawyer may include:
- Printing fees
- Complaint filing fees
- Appeal filing fees
- Motion filing fees
- Expert witness fees
How Much Can You Sue For Breach Of Contract?
Breach of contract suits are designed to even out for the damaged party. This means you are generally not going to get more than what you would have had if the contract had never been broken.
So what if our imaginary marketing company had been wronged instead of the business owner? If the business owner agreed to pay $20,000 for the new website but, upon completion, only paid $10,000, then the marketing company could sue for the missing half of that money, but not more. This is a type of compensatory damage known as expectation damages.
There are exceptions. Sometimes with a breach of contract claim, you can be awarded “reliance damages.” Reliance damages account for the monetary loss incurred by reasonable reliance on the broken contract. Returning to our original example where the construction company broke the contract, the beleaguered restaurant may be able to recover the lost money spent on outdoor chairs and tables.
There is a catch, though. Reliance damages are awarded on a case-by-case basis under promissory estoppel, which means you must first make a reasonable effort to mitigate the reliance damages yourself.
Compensatory damages are money awarded to an injured party that compensates for damages, injury, or another incurred loss.
Is Breach of Contract a Civil or Criminal Case?
To the layperson, every situation that ends up in court may seem interchangeable, but there are different levels of “rule-breaking,” each with separate recourse and possible outcomes.
Criminal Case
Criminal proceedings deal with violations of law where the city, state, or federal government is the “victim.” The victim of a crime may have no say in whether or not a case goes to court. Criminal cases can result in severe penalties like jail time.
Civil Case
Breach of contract is considered a civil issue, where the burden of proof is lower than in criminal court, and the only compensation that can be awarded is money. The injured party is the plaintiff and is responsible for initiating the proceedings.
A tort is another action that falls under civil law and is commonly confused with a breach of contract. A tort is typically a private breach of your civil rights.
Breach of Contract vs. Breach of Tort
Monetary damages are the most significant difference between a breach of contract and a breach of tort. With a breach of tort, the affected party can sue for punitive damages in addition to contractual losses. This is typically not the case for a breach of contract unless other claims are available to you. (i.e., fraud, breach of fiduciary duty, etc.
What If Monetary Damages Aren’t The Best Method?
There are instances where the court may agree that money is insufficient to compensate for a breach of contract truly. In this case, a different contractual remedy – specific performance – may come into play.
Under specific performance, the court may order the defendant to fulfill the breached contract rather than pay damages. This is relatively rare, typically seen in real property, such as real estate and rare chattels.
Rare chattels (essentially any property other than real estate) includes movable goods such as:
- Rare collections
- Animals
- Antiquities
A person may file a claim for breach of contract in any court with the proper venue, jurisdiction for contract disputes, and the amount in controversy unless the contract states where the claim should be filed. Either way, this type of remedy in a breach of contract lawsuit is fairly rare and should not be expected as a default unless it regards the real property or rare chattels.
Arizona's Trusted Contract Lawyers
Come to your strategy session prepared with questions you have about how we may handle certain scenarios, any issues that are impacting your business right now or that you expect to impact your business soon, and anything else that you think we should know as we develop a strategy together. It can also be a good idea to be prepared to share a general overview of your business’s history and what your goals for the future are.
By partnering with a reliable, experienced attorney, you can rest easy knowing that your business will be protected in the future and that any issues you face are in trustworthy hands. We are committed to building authentic relationships with clients, so you know that we are not simply recommending vague best practices, but rather, we are providing customized solutions and legal advice for you and your business.