Breach of Contract: What To Do When Someone Breaks A Contract

A contract is a legally binding document where two or more parties agree to perform (or avoid performing) certain actions. They’re a crucial tool for business deals and other types of transactions, since the courts can enforce the contract if one party doesn’t hold up their end of the deal. That’s called a “breach of contract.” So what does a breach of contract mean for you, and what can you do about it?

Contract Law Basics

There are a few elements that must be present for a contract to be legally enforceable:

• Legal Purpose: The purpose of the contract must be legal – a contract where one party agrees to commit murder is not enforceable
• Offer and Acceptance: There must be a clear offer and acceptance. That means one party must clearly offer to create a contract and the other party or parties must clearly accept. A vague promise isn’t enough.
• Meeting of the Minds: In order for a contract to be enforceable, both parties have to intend for it to be a contract. That means they intend for the contract to be legally binding and they agree on the terms.
• Consideration: A contract is only enforceable if there is consideration from both sides, which is basically another word for payment. However, consideration doesn’t have to come in the form of cash. For example, one side could offer 1,000 pounds of widgets in exchange for 1,000 gallons of milk. Action can also be consideration; one side could provide 100 haircuts in exchange for $1,000.
• Parties Capable of Contracting: Some people are legally unable to enter into a contract. In general, the law assumes that minors and people with serious mental illness can’t fully understand the implications of signing a contract. The courts will look at that contract and may decide not to enforce it if they feel the one or both parties didn’t understand what they were getting into.
• No Unconscionability: No contract is perfectly equal – everyone is entering a deal because they feel they’re getting something out of it! But some contracts are so unequal that they’re considered “unconscionable.” That can happen when one party has a lot more bargaining power than the other. For example, a prenuptial agreement between an extremely wealthy spouse and a spouse that isn’t a US citizen may be found unconscionable since the wealthy spouse has so much power over the terms of the agreement.

In general, a contact can be oral or written as long as those requirements are met. There are certain exceptions – California law requires that there must be written evidence of certain kinds of contracts in order to enforce them. Note that the contract itself doesn’t necessarily have to be written, but there needs to be a memorandum or similar written record that shows that both parties intended to create a contract. Types of contracts that require written evidence in California include:

• contracts that will last longer than a year
• contracts that will last longer than one party’s lifetime
• contracts for the sale of real property
• contracts for the sale of goods worth more than $500

Cal. Civ. Code § 1624.

While it’s possible to have an enforceable oral contract, it’s always better to write things down. When it comes down to enforcing that contract, you don’t want to get stuck playing the he-said-she-said game.

Dealing With Breaches of Contract

So now we know what it takes to create a contract – what does it mean to breach one? This one is pretty self-explanatory. A breach happens whenever one party fails to perform their side of the contract. Of course, there are varying degrees of breach. Imagine a contract where you agree to buy 1,000 widgets for $1,000. You pay the money but they never send the widgets; that’s a clear breach of contract. If they deliver the widgets a few hours later than you originally agreed, that’s a much less significant issue.

The level of severity will determine what you decide to do in case of a breach of contract. For a minor issue like missing a deadline by a few hours, it may not be worth your time to do anything at all. For something serious (like completely failing to deliver your order), you may want to take more serious measures. That typically means calling your lawyer, although in some cases it may make more sense for you to approach the other party personally rather than go straight to the attorneys.

Your attorney can work with you to draft a demand letter, where you explain what happened, what it cost you, and what you want from the other party. That will generally open negotiations headed toward a settlement. You may go through mediation or arbitration to attempt to keep the matter out of court, which is expensive and time-consuming. If necessary, you can take the breach all the way to trial.

What Do I Get for Breach of Contract?

So when you make a claim for breach of contract, what are you actually asking for? There are a number of different options. Most commonly, it’s monetary damages. That number will include the harm that you suffered as a result of the breach. For example, you may have lost out on selling 100 widgets because your delivery was late – the other party will have to pay to cover those losses.

You may also ask for restitution, which means getting back money or property that you gave to the other party as part of the contract. If you were induced to enter a contract by fraud, force, or mistake, you may ask for rescission. That means the court completely voids the entire contract. You could also ask for reformation, where the court voids part of a contract to avoid inequality.

In very rare cases, you may ask for “specific performance.” Essentially, that’s where the court forces the other party to carry out their end of the bargain. However, it’s extremely uncommon – almost every case will be an issue of monetary damages or restitution.

We Can Help

If you’re dealing with a breach of contract, we may be able to help connect you with an experienced contract attorney that can help you understand your legal rights and options.