Businesses and corporations, no matter how big or small, deal almost daily with contracts. They have employment contracts, leasing contracts, contracts with vendors and suppliers and more. It seems routine until one party fails to perform according to the terms of the contract. This may give rise to allegations of a breach of contract. In order to win on a breach of contract lawsuit, the plaintiff who files the suit must prove four elements:
1) There is a valid contract: Business contracts are generally in writing, but in some circumstances oral contracts are also valid. It is more difficult to prove the existence of an oral contract. Whether the contract is written or oral, in order to be valid, there must have been:
- An offer by one party to the other.
- Acceptance of the offer by the other party. When there is acceptance, the parties have agreed to the essential terms and it is clear what is expected on both sides
- Consideration. Each party has given and received something of value.
2) The plaintiff performed according to the contract terms.
3) The defendant breached the contract: This means the defendant did not fulfill his or her obligations under the contract.
4) The plaintiff was damaged due to the breach.
Defenses to allegations of breach
In order to win a case, the breach must have been material. A material breach is one that deprives a person of the very benefit for which he or she contracted. Courts look at many different factors to determine if the breach is material.
Defendants may show that the breach was not material and the plaintiff essentially received the benefit for which the contract was created because the defendant substantially performed. Defendants may argue there was never a valid contract, the terms were vague, illegal or against public policy.
Damages for breach of contract
Each breach of contract case is unique. The first step in determining damages is to look at the contract terms. Many business contracts have written provisions as to what the penalties are if one party is in breach. If it not spelled out in the terms of the contract, the court will consider awarding:
- Specific performance of the contract, which means the party in breach will be ordered by the court to fulfill the terms of the contract.
- Money that was lost due to the breach of contract to be paid to the plaintiff.
- Compensation to the plaintiff for time that was lost.
- Reimbursement to the plaintiff of expenses that were incurred.
- Time, money and expenses that will be lost in the future due to the breach.
- Any other damages that may be provided for according to the terms of the contract.
Contract law is complex. Plaintiffs need be prepared for the party allegedly in breach to raise all possible defenses. The plaintiff will argue the breach was material and the defendant will argue that it was not. The defendant may counter-sue the plaintiff for plaintiff's alleged breach of the contract. Both sides will need to gather evidence to support their case.
The parties may disagree on what remedy should be imposed. The calculation of damages may require the services of an expert. Often, business contracts provide attorney's fees to be paid to the winning party. An experienced contract attorney can advise you of your rights, tell you what to expect and help you with the breach of contract case whether you are the plaintiff or defendant.
Contact us today for a free consultation if you have any questions about breach of contract in Texas.