What Are the Elements of a Breach of Contract Claim?
May 23, 2023
Any person or entity operating a business is no doubt going to need to enter into agreements with others to help supply or run the operations. If you sell products, you’ll need an agreement with another party or parties to provide those products. Even if you just provide professional services, you may need an accounting firm to do your taxes. You may just need a nighttime cleaning service.
Generally, these agreements will take the form of a binding contract, even if they are just oral agreements. The best protection, of course, is for both parties to have an express, or written, contract that spells out all the terms of who does what, when, where, and how.
When one party fails to live up to its obligations, then a breach can be said to have occurred. Some breaches can be easily fixed and everyone moves on, which is called a minor breach. Other breaches can threaten the relationship and perhaps even the survivability of one party. These breaches are called major, or material.
If you are involved in a contract and believe the other party has breached it in or around San Jose, California, or if you want to know how you can get out of a binding agreement, contact us at Leet Law. Consult with our business litigation attorneys before matters get out of hand and a courtroom battle is on the horizon. Let’s resolve matters so both parties can move on. Leet law will also aggressively defend your rights and interests if things do end up in litigation.
Leet Law serves business clients throughout the Greater San Francisco Bay Area, including not only San Jose, but also San Francisco, Palo Alto, Oakland, and more.
What Is a Contract?
A contract must have several elements to be valid under the law. Different legal definitions exist, but in general terms, there must be an offer and acceptance, adequate consideration, capacity, and legality. Offer and acceptance are the starting point. Company A approaches Supplier B to provide 200 microchips each month for their construction of drones. For consideration, Company A offers a certain amount of dollars for those chips.
Capacity means that both parties are of legal age and are not coerced into consenting to the agreement, nor are they under the influence of drugs or alcohol when they do so. Legality means that the agreement does not break any laws.
Oral contracts, provided they cover all the above elements, are generally valid unless they involve the sale of goods for more than $500, the sale or transfer of land, or remain in effect for more than a year.
Types of Breaches: Major, Minor, and Anticipatory
There are generally three types of breaches of a contract: minor (or immaterial) breaches, major (or material) breaches, and anticipatory breaches.
In our microchip example, suppose the supplier is obligated to deliver 200 microchips on the first of each month, but one month, the delivery is delayed because of weather or perhaps a strike at the plant. The chips don’t arrive until Day 5 of the month. This could be a minor breach since Company A could probably keep operating with a small delay.
Say the shipment doesn’t arrive until Week 3, and Company A has lost customers and revenue and is facing serious consequences. This could rise to the level of a major breach.
An anticipatory breach occurs when one party simply announces they will not be able to fulfill their part of the bargain. In addition to one party’s announcing they are not going to fulfill their obligation, an anticipatory breach can also be signaled by one party’s actions. They simply refuse to return phone calls or carry out their obligations. In our microchip example, another recognized form of an anticipatory breach would be if the supplier started selling and shipping the chips to another company.
Damages and Remedies Available
If a breach of contract does end up in litigation, there are different remedies that the court may apply, depending on the circumstances. The court, for instance, could order the breaching party to fulfill its contracted obligation, which is called specific performance. The court may issue an injunction, which forbids one party from doing something. Another remedy is recission, allowing the non-breaching party to exit the contract.
As for monetary damages, there are two types: expectation and consequential. In our microchip scenario, if Company A were forced to buy chips at a higher price, Supplier B could be ordered to pay the difference for breaching the contract. As for consequential damages, if Company A lost $50,000 in sales, Supplier B could be ordered to compensate for the loss.
Client-Centered Legal Counsel
At Leet Law, we have worked with businesses of all sizes and helped resolve issues involving contractual obligations both outside and inside the courtroom since 2005. If you’re facing a potential or actual breach, or you need guidance on how to revise and revoke a contract, reach out immediately.
The future of your business may well be at stake, so you need to act quickly and decisively. With our firm on your side, we can help you move forward. We stand ready to assist you from our San Jose office wherever you’re located in the Greater San Francisco Bay Area.