Breaking or Breaching a Contract

Often, contracts can be broken in at least three ways:

  1. One person does not perform as promised
  2. One person prevents the other party from performing
  3. One party states that it will not comply with the contract

Courts can be asked to order parties to perform certain terms of certain contracts. This is called specific performance. However, by far, most contract breaches are resolved by awarding the non-breaching party monetary damages. You ought to understand that this process is, at best, imperfect, and more often than not leads to even the winning party losing valuable benefits of a contract.

Generally, if your contract is broken by the other side, and you decide to sue, a court may award you the money difference between the contract price and cost you incurred in performing as agreed. Contract damages questions are complicated and require both parties to act in good faith. We can take a look at what sounds like a simple contract, and see how complicated it becomes when one party breaches.

As an example, if A and B have a contract to paint A's car for $500, and it would cost B $250 to paint the car, and A refuses to let B paint his car, B would likely be offered $250, or his "lost profit" on the contract. Of course, if B had also spent $100 in preparation for painting, B would likely be entitled to recover $350.

However, A can argue that she told B she would not let B paint her car, before B spent the $100, and the court may not award this $100 to B, since B did not "mitigate" his damages. The law requires that a non-breaching party make every attempt to limit or mitigate his damages. Also, if A can prove that A brought C to B and C agreed to have B paint her car for $500, a Court might not award B anything, since B still has a car to paint and can still make his $250 profit. B's job would be to convince the judge that B would have painted C's car after he painted A's car and thus, he would have made 2 separate $250 profits. Depending upon the evidence put forth by A or B, a judge would rule in favor of one or the other.

Seriously consider each of these issues, should you decide to bring a small claims lawsuit for breach of contract. There are different types of evidence which you can bring to court to justify your position and try to prove your damages. Remember, if you are suing, you must prove your case with real evidence.

Damages for breach of contract can get even more complicated. "Special damages" are those damages which may be recovered by a non-breaching party when the probability of that "specific" damage was, or should have been, reasonably known by you at the time you entered into the contract. As an example, assume you were required to hire 10 employees to perform a "rush" job under contract. If you told the other party at the time the contract was made and the other party accepted this term, then you might add this "special damage" to your lost profit on the contract discussed above.

Also, you should examine the actual breach. If a contract calls for a party to deliver one thousand (1,000) gallons of milk, and nine hundred and ninety three (993) were actually delivered, the receiving party should not be so quick to jump to a conclusion that a breach occurred because 1,000 gallons were not delivered. As a general rule, courts do not like such literal interpretations of breach which might cause a hardship to the other party, who has essentially, but not literally, performed. A court in such a case might award damages for the missing seven (7) gallons of milk. Or, in many instances there may be a custom in the industry that 1,000 gallons means + 10%. 993 gallons is well within such a standard, assuming one exists, and as such, a court might find that no breach occurred.

Because attorneys' fees may be awarded in contract cases, it is important to accurately evaluate your case. If you were the person bringing the lawsuit for a full breach of contract because 7 gallons of the 1,000 gallons were not delivered, not only might you lose your case, but an angry judge might award the other party all of their attorneys' fees on the theory that your position was not justified, or too picky, or "frivolous".

If you need assistance with a broken or breached contract, we’re here to help. Contact member services and ask to be paired with an attorney.

Posted in: Contracts