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Breach of Contract

Our law firm can help you resolve legal issues involving breach of contract.

Our experienced litigation attorneys have handled business and real estate disputes involving oral and written contracts.  In some cases, we may be able to take all or part of your case on a contingency fee, or low flat rate fee basis.  This page covers frequently asked questions about contracts law.

What is a Contract?

A contract is a promise, or a set of promises that the law will enforce.  A contract can arise by written contract, as a matter of law (implied contracts) or orally.  Of course a written contract is always in your best interest, and our law firm can help you draft and negotiate contracts.

Contracts help businesses and individuals plan their futures and organize their economic affairs.  For example, when a lumber company enters into a contract with a wood supplier, it does so in order to try to guarantee that a certain amount of shipments of lumber will be made so the lumber company can plan for its future growth and expansion.  The shipper of lumber agrees to ship the lumber, and the lumber company agrees to buy the lumber at a certain price.   Thus, a contract will normally spell out the rights and duties of each party, and set forth terms such as price, shipment dates, and other terms.

Contracts are common in business and real estate transactions, and also intellectual property licensing.  Our firm can represent you in each of these types of matters, including arbitration, and civil litigation.

What is an offer?

An offer is an unequivocal expression of terms by an “offerror” that invite the “offeree” to accept the terms, thus creating a contract.  An offer may request a return promise (called a bilateral agreement) or may request that the offeree perform an act (called a unilateral contract).

What is an acceptance of an offer?

An offer must be accepted to create a valid and binding offer.  In many cases the acceptance must be an objective manifestation of assent to accept the terms of the contract as written (in other words a “mirror image” acceptance).

For example, in the real estate context, if a seller offers to sell a piece of commercial property for a million dollars, and the buyer accepts “if” the seller throws in the pick-up truck located on the property, the buyer has not actually accepted the deal, and the contract is not actually formed because there was no “meeting of the minds.”  The buyer wanting the truck thrown into the deal actually creates a “counter-offer.”  The counteroffer can then be accepted by the seller in his or her own discretion.

This is a very simple and basic understanding of how a contract works.

What is consideration?

All contracts (whether oral or written) must be supported by “consideration” to be deemed enforceable.  Consideration does not need to be anything fancy, but there has to be some type of “bargained for mutual exchange.”

For example, in the case of a copyright royalty contract (ex. a music publisher agreeing to pay you a commission on all songs sold) consideration might be the artist offering the rights to the music copyrights, and the publisher agreeing to market and sell the songs and pay the artist or band a royalty. Consideration is thus the “glue” that binds the contract.  Each party must be bargaining with the other party wanting something the other party has to offer.

If there is no consideration, there may not be a valid and enforceable contract in the absence of a claim for “promissory estoppel” (promises that are enforceable without consideration).

When we are looking to see whether or not there is a breach of contract, we look first to these first few basic elements – (a) was there an offer (oral or written), (b) was there an acceptance and (c) was there consideration to bind the contract.   If you got this far, you are almost a contracts expert!

What are the most common terms to a contract?

The following are some of the most common terms that most contracts will have:

  • identification of parties
  • agreed upon terms
  • dates for performance
  • recitals
  • definitions of key terms
  • choice of law designation
  • merger clause (no oral contracts exist once the contract is signed)
  • arbitration clause
  • signature of parties

What are the top 10 defenses to contract formation?

One of the parties to an oral or written contract may claim that the contract was never actually formed.  Some typical “defenses to formation” are:

1.  Mutual mistake of fact (both parties were confused or mistaken as to an essential term of the contract).  This could preclude the parties have a “meeting of the minds”

2.  Vagueness or ambiguity – a contract is not enforceable if the essential terms are not “definite and certain.”

3.  Duress – if the contract was entered into “under duress” this could preclude contract formation.

4.  Undue influence – This is similar to duress, but involves someone in a trust position exerting unfair pressure on a party to sign or enter into the agreement.  For example, someone with a fiduciary duty owed to a party forces them into signing the contract (this arises in some cases of financial elder abuse).

5.  Fraud (the old saying is “fraud vitiates consent”).  There are different types of fraud that can invalidate a contract.  For example fraud in the inducement (ex. misrepresentation as to material facts), fraud in the execution (ex. tricked into signing a contract) and fraudulent concealment (ex. running back the odometer to induce an auto dealer contract).

6.  Illegality – you cannot enforce gambling contracts for example (note that this is different from borrowing money from a casino).

7.  Unconscionability (substantive and procedural).  For example, forcing someone to accept unconscionable terms as part of a deal (for example, forcing an elder to enter into a pick-a-pay mortgage contract that will ultimately force them into foreclosure).

8.  Contracts that violate public policy – (this could be a bunch of different things, one example might be a contract that prevents a party from earning a livelihood or in unreasonable restraint of trade – non-compete agreements).

9.  Incapacity – (ex. contracts by minors under 18, unless the contract is for essential life items, or contracts entered into by an insane person).

10.  Intoxication – (ex. entering into a contract one one party knows the other party is drunk).

What is a breach of contract?

A breach of contract occurs where one party “materially breaches” the contract.  One this happens, the other party to the contract is excused from performing their end of the bargain.  The trick here is that if the breach is only deemed “minor” then the other party is normally required to continue contractual performance.  A skilled contracts law firm can best help you make this determination.


Sample Legal Document – Breach of Contract Demand Letter

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What are the remedies available for a breach of contract?

The general measure of damages when one party breaches a contract is “expectation damages.”  This is the amount of money the non-breaching party would have realized had the other party not breached their agreement.  Another was to say it is money damages sufficient to put the non-breaching party in the same position as if the other party had performed.  Usually money damages will suffice, and companies and individuals are allowed to breach their contract if they are willing to pay money damages (often referred to as an “efficient breach).

But there are also other types of damages that may arise in a breach of contract case.  Such damages may include lost profits, consequential damages, costs, attorney fees, restitution, lost royalties, liquidated damages, and other out of pocket losses.

Can I recover attorney fees for a breach of contract in Arizona?

Arizona is a unique state, in Arizona, where one party breaches a WRITTEN CONTRACT, the other party may seek recovery of their reasonable attorney fees.  This remedy is set forth in A.R.S. 12-341.01 which states:

“A. In any contested action arising out of a contract, express or implied, the court may award the successful party reasonable attorney fees. If a written settlement offer is rejected and the judgment finally obtained is equal to or more favorable to the offeror than an offer made in writing to settle any contested action arising out of a contract, the offeror is deemed to be the successful party from the date of the offer and the court may award the successful party reasonable attorney fees. This section shall in no manner be construed as altering, prohibiting or restricting present or future contracts or statutes that may provide for attorney fees. B. The award of reasonable attorney fees pursuant to subsection A should be made to mitigate the burden of the expense of litigation to establish a just claim or a just defense. It need not equal or relate to the attorney fees actually paid or contracted, but the award may not exceed the amount paid or agreed to be paid.”

What is the statute of limitations for a breach of contract case?

Our law firm handles breach of contract arbitration and litigation in Arizona and California.  Here are the statute of limitations on contract claims:

California

(a) Breach of written contract – 4 years (see California Code of Civil Procedure (CCP 337)

(b) Breach of oral contract – 2 years (see California Code of Civil Procedure (CCP 339)

Arizona

(a) Breach of written contract – 6 years (see A.R.S. 12-548)

(b) Breach of oral contract – 3 years (see A.R.S. 12-543)

(c) Breach of contract for sale of goods under UCC – 3 years (See A.R.S. 12-544(4) and A.R.S. 47-2725(A))

Exceptions to these general rules may exist, and the court may consider principles of equitable tolling (meaning you might get more time to file a lawsuit or arbitration).  The statute of limitations begins to run in most cases upon “discovery” of facts giving rise to a cause of action.  Again, these rules are not rigid and your best bet is to contact a contracts law firm to review your case.

More information

For more information about our business and contract law services contact us at (877) 276-5084 or fill out the form below.  We look forward to discussing your case.

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