What Is a Breach of Contract?
A breach of contract is probably the most common case among California business litigation attorneys. A breach can involve different situations: a partnership dispute, real estate transactions gone awry, failure to pay rent or lease obligations, sales transactions, promissory notes and collections, and more, so long as one party has agreed upon an obligation to another party and fails to honor it.
The “essential elements” of a breach of contract claim in California are set forth in the Judicial Council of California’s Civil Jury Instructions, or CACI’s, No. 303. A breach of contract legal action involves four elements:
- The existence of a contract, whether express or implied, between plaintiff and defendant
- The plaintiff performed as specified or was excused for nonperformance
- The defendant failed to perform as required
- The plaintiff suffered damages arising from the breach
Material vs. Immaterial Breach
A material breach is one that results in damages to the non-breaching party to the contract. An immaterial breach is one that is still important, but it does not result in irreparable damages. In short, a material breach basically kills the contract, while an immaterial breach is survivable.
Using the widget example, if the supplier delivers only a portion of the contracted number on the specified day because of weather conditions but then delivers the remaining widgets two days later, that would probably be immaterial if the non-breaching party had enough widgets on hand to continue meeting demand. If the non-breaching party were then unable to meet its obligations because of the partial delivery, it could be considered a material breach.
The concepts of material and immaterial can often be contentious issues in a breach of contract lawsuit.
Remedies for a Breach of Contract
When a party to a contract suffers a breach, the remedies — or relief — may include:
- Damages: The plaintiff can sue for compensatory damages for losses suffered or for nominal damages when no money is actually lost.
- Specific Performance: The plaintiff can ask the court to order the breaching party to fulfill its obligations, which is called “specific performance.”
- Cancellation and Restitution: The non-breaching party can cancel the contract and return to the situation it was operationally in before the contract, which is called “restitution.”
Resolving Contract Disputes
Not all contract dispute scenarios need to go to court. Sometimes the contract itself will contain language for resolving disputes through alternative means. In any case except perhaps the most severe and damaging, the first step is negotiation. The non-breaching party, in consultation with an experienced attorney, should reach out and attempt to resolve the issue through negotiation.
If negotiations stall, the parties can agree to mediation or arbitration, but as resolution attempts escalate, so too will the cost in time and money. Mediators and arbitrators obviously charge for their services. If the situation goes to court, costs will grow even greater, and the case could end up dragging on for months or even longer.
Defending a Breach of Contract Accusation
If you find yourself in court as the defendant, some of your available defenses include:
- Mutual or unilateral mistakes — Perhaps there was never a true meeting of the minds, or one party was mistaken in interpreting the agreement.
- Duress or undue influence — The contract was signed under duress of threat or blackmail, or barring that, one party unduly exerted its will over the other party. Note: Simple persuasion does not count as undue influence.
- Unconscionability — When one party’s terms were grossly unfair and the other party was induced into agreeing with the terms.
- Misrepresentation or fraud — When one party accidentally or fraudulently misrepresented the terms of the contract at the expense of the other party.
Trust a Skilled Attorney
Facing a breach of contract accusation can thrust you into murky legal territory. Imagine the court contest in defining material versus immaterial. You need to take charge on the defensive front before matters ever get to court. With proper legal representation, you can seek negotiation and compromise to avert costlier options.