Generally, a breach of contract is a failure, without legal justification, to perform a promise made in a contract. This could include anything from failing to perform in a way that meets the standards of the industry to a failure to uphold an express or implied warranty. Contract breaches can be devastating for the wronged party, so if you formed a contract that was not fulfilled, it is important to contact an experienced business law attorney who can help you seek restitution.
Identifying a Breach
When a plaintiff claims that another party breached a contract, a court is required to analyze certain factors in making its determination, including:
- Whether a contract between the parties ever existed;
- If a contract did exist, what the terms of the agreement entailed;
- Whether the contract was ever modified;
- Whether one of the parties ever breached the contract;
- If there was a breach, whether it was material to the contract;
- Whether the breaching party had a legal defense for his or her actions; and
- What type of damages resulted from the breach.
The first part of the determination requires an analysis of whether the contract in question was valid. To be considered a valid contract, an agreement must include an offer by one party and an acceptance by another. Something of value must also be given in return for the promise of completion. Finally, the terms of a contract must be defined specifically enough that they could be enforced by a court.
When a court determines that one party did commit a breach according to the terms of the agreement, it must determine whether that breach was material to the contract. Florida is the only state in the nation where some courts require a showing of materiality in breach of contract cases. Elsewhere in the country, any type of breach, no matter how minor gives rise to a claim of damages. As a result, breach of contract cases can be more difficult to litigate in Florida than in other parts of the country.
Generally, a breach is material, if as a result of the failure to perform, the non-breaching party received something substantially different than what was specified under the terms of the contract. To decide whether a breach was material, courts analyze the following factors:
- The amount of benefit received by the non-breaching party;
- Whether the non-breaching party can be compensated;
- How much performance the breaching party actually completed;
- Whether hardship prevented full performance;
- Whether the breaching party exhibited negligent or willful behavior in breaching the contract;
- The likelihood that the breaching party will perform the rest of the contract.
Even if a party did not receive the item or service contracted for on time, the breach will usually only be considered minor if the breaching party performed its obligations within a reasonable time. In these cases, the non-breaching party must still hold up his or her end of the contract.
Legal Defenses and Remedies
If a court determines that a breach was material, it will then look to the facts in an attempt to discover whether the breaching party had a legal defense excusing him or her from performance. Valid defenses include:
- A lack of capacity to form a contract, due to age or mental impairment;
- The non-breaching party used undue influence or misrepresentation to force the breaching party to agree to the contract;
- The contract’s terms were oppressive or the bargaining process was unconscionably unfair, which is usually demonstrated by a gross inequality in bargaining power between the parties;
- The contract required illegal or immoral conduct; and
- Both parties made a mistake regarding a basic fact on which the contract was based, the mistake was material, and the non-breaching party did not assume the risk of mistake in the contract.
If a court finds that a breaching party had a valid defense to a contract, the non-breaching party has the option of canceling or revoking it. In extremely unfair situations, a court will declare the contract void. Finally, a court will assess whether the non-breaching party is entitled to a remedy, which could include:
- Specific performance; or
- Cancellation and restitution.
The most common remedy for a breach of contract claim is the payment of damages, of which there are four types:
- Compensatory damages, which help put the non-breaching party in the position he or she would have been in if there had been no breach;
- Punitive damages, which are intended to punish a wrongful act and are rarely awarded in breach of contract cases;
- Nominal damages, which are awarded when a contract was breached, but the non-breaching party cannot prove actual economic loss; and
- Liquidated damages, which are specific damages outlined in the contract itself.
When damages are not enough to make a non-breaching party whole, the breaching party can be court-ordered to perform his or her part of the contract, a concept known as specific performance. Usually, courts only order specific performance when the subject matter of a contract is unique or rare and damages would be an insufficient remedy. For instance, courts have found specific performance appropriate when a contract concerned a work of art, a custom made product, goods in short supply, or real estate.
Finally, a non-breaching party can cancel a contract which essentially voids it and relieves all parties of any further obligation under the terms of the contract. However, if non-breaching parties have already given a benefit to the other party, they can sue for restitution in an amount that would put them in the same position they were in before they entered the contract.
Contact Clearwater Business Law to Speak with an Experienced Contract Law Attorney
At Clearwater Business Law, our legal team is dedicated to helping our clients enforce or defend a contract. If you have questions or concerns about your own obligations under a contract, please contact us by calling (727) 785-5100 or send us an email containing a brief description of your case.