Bringing a Breach of Contract Action
To establish a breach of contract claim, the party alleging breach of contract must allege: (1) the existence of a valid contract; (2) breach of the contract; (3) the breach was material; and (4) plaintiff suffered actual damages as a result of the breach.
Existence of a Valid Contract. A contract can be written, oral, or implied by conduct, but it must include an offer, acceptance, consideration, and a mutual intent to be bound by its terms. Courts often refer to formation of a contract as a “Meeting of the Minds.”
Offer and Acceptance: An offer is a proposal made by one party (the offeror or Seller) to another party (the offeree or the Buyer) expressing an intention to create a legally binding agreement. The terms of the offer must be definite and certain, including essential elements such as price, quantity, subject matter, and conditions. For example: “We offer to sell you 100 pieces of lumber at $10 per piece subject to our limited warranty. Our offer expires in three days.”
Once an offer is made, the offeror is generally bound by it until it is terminated, revoked, or expires according to its terms.
Acceptance is the offeree's unequivocal agreement to the terms of the offer. “I accept your offer to buy 10 pieces of lumber at $10 per piece subject to your limited warranty.” Any modifications to the offer would constitute a counteroffer and requires acceptance by the original offeror. Thus, a buyer who states “I’ll take your lumber at $7.50” has rejected the original offer and made a counter offer. Generally, acceptance must be communicated in the manner specified by the offeror, if not specified, in a manner consistent with the customary method of communication or as expressly allowed by law.
Once acceptance is communicated, a contract is formed, and both parties are bound by its terms, assuming all other elements of contract formation are met.
Breach: The plaintiff must demonstrate that the defendant failed to perform a duty or obligation as set out in the contract. This could include failing to deliver goods or services, failing to make payments, or otherwise not fulfilling contractual obligations.
Materiality: The breach must be material, meaning it goes to the heart of the contract and substantially impairs the value of the agreement. Minor or inconsequential breaches may not be sufficient to support a claim.
Damages: The plaintiff must have suffered actual damages as a result of the breach. These damages can be monetary, such as lost profits or costs incurred due to the breach, or non-monetary, such as harm to reputation or opportunities lost. There must be a direct causal link between the defendant's breach and the plaintiff's damages. The breach must be the “proximate cause” of the harm suffered by the plaintiff.
Compensatory Damages: These are designed to compensate the non-breaching party for the actual losses suffered as a direct result of the breach. Compensatory damages aim to put the non-breaching party in the position they would have been in had the contract been performed as promised. These damages may include:
Direct financial losses, such as lost profits or additional expenses incurred due to the breach.
Costs of mitigating damages, such as expenses incurred to minimize losses after the breach occurred.
Consequential Damages: Also known as special damages, these are damages that arise indirectly as a consequence of the breach and are foreseeable by the parties at the time of contract formation. Consequential damages may include lost profits, lost business opportunities, or other economic losses beyond the immediate contractual obligations.
Liquidated Damages: These are damages that are specified in the contract itself as a predetermined amount to be paid in the event of a breach. Liquidated damages clauses are enforceable if they represent a reasonable estimate of the anticipated damages resulting from the breach and are not intended to penalize the breaching party.
Miscellaneous Issues
Attorneys Fees: The general rule is that attorneys fees cannot be recovered in a breach of contract case unless the contract provides for recovery of fees by a “prevailing party” or pursuant to a statute. In Texas, for example, you may be awarded attorney’s fees pursuant to Tex. Civ. Prac. & Rem. Code §38.001
Statute of Limitations: In Texas, breach of contract claims must be brought within four years from the known date of breach.
If you are having a contract dispute, or need a contract written, please give the Cochell Law Firm a call at (346) 800-3500. The Cochell Law Firm has over 35 years of experience in fighting for clients’ legal rights in contract disputes.