What is a Contract?
There are three elements to a contract: offer, acceptance, and “consideration” (an agreed upon exchange of value). While an oral contract can be difficult to prove, it may be just as enforceable as a written agreement. Any action signifying agreement between two or more parties can create an enforceable contract.
When two or more parties enter a contract, written or otherwise, they are under certain legal obligations. Should one party fail to uphold its end of the contract (in other words, “breach” the contract), the other party (the non-breaching party) may be entitled to compensation, often referred to as “damages”. Some breaches are serious enough to terminate the contract altogether; other breaches only entitle the non-breaching party to damages, but still require that the contract be completed by both parties. This question requires a careful analysis by an attorney experienced in contract disputes.
Types of Contractual Disputes
Both individuals and businesses can be parties to binding contracts and therefore be liable for damages in the event of a breach. Some of the types of contracts in which disputes commonly arise include:
- general commercial contracts;
- employment contracts;
- sales agreements;
- insurance policies;
- shareholder contracts;
- partnership agreements;
- contractor agreements;
- privacy agreements;
- debt collection contracts;
- loan agreements;
- lease and real estate contracts;
- warranties and service agreements;
- non-compete contracts;
- personal guarantees, and
- service agreements.
Taking Legal Action for Breaches of Contract
If you have been “damaged” by another party’s breach of contract, your options may include:
- asking the court to enforce the contract according to its own terms, including any specified penalties (“specific performance”);
- canceling the contract, and filing a lawsuit to recover any additional costs you’ve incurred in finding a substitute; and
- continuing with the contract, but filing a lawsuit to recover your increased costs, loss of business, or other damages you’ve suffered.
What Happens if I Sue?
There are two dimensions to any lawsuit involving a contract: the first is whether there is liability on the part of the breaching party; and the second is the amount of the damages. “Liability” means that a party is found to be at fault. Without fault, there can be no damages.
If the court finds that someone at fault, there are several measures of damages. For instance, you may be entitled to “benefit of the bargain” damages. In other words, the court may order the breaching party to pay you a sum of money that puts you in the same position as you would have been had they honored the original agreement.
In other cases, the court will order that the breaching party fulfill its end of the bargain. This type of “injunctive” relief is less common than money damages and is often referred to as “specific performance”.
Another measure of damages is called “unjust enrichment” where one party has bestowed a benefit on another that, in all fairness, they should be compensated for.
As you can see, there are numerous ways of calculating damages. An experienced contracts attorney at Deno Millikan can review your matter and advise you what the most likely calculation is.
Other Contract Provisions
In addition to the contract provisions that describe the parties’ obligations, many contracts contain numerous other clauses. For example, many contracts contain “attorneys’ fees” clauses that entitle the prevailing party to recover the costs of its lawsuit.
Other examples of contract provisions might include a description of what happens should one of the parties fail to perform. An example of this type of provision would be a liquidated damages clause, where the buyer of some real estate is required to pay a sum of money should he (or she) back out of the transaction.
Finally, many contracts contain provisions for alternative dispute resolution (“ADR”). You may not be able to sue in court, and instead be limited to arbitration or mediation. An experienced attorney at Deno Millikan can review the contract, advise you of your options, and give you an analysis of your best course of action. Or, an experienced attorney can suggest other provisions that limit your risk, and increase the probability of the success of your business venture.
Contact our office today at (425) 259-2222 to schedule a case evaluation. Let us discuss your legal options and how we may be able to assist you in resolving your contract dispute and recovering your losses.