Contract Disputes: A Legal Guide to Common Contract Claims
This guide is intended to explain the different types of breach of contract claims in an easy to understand manner. In short, there are two primary categories of contract claims: (1) formational issues; and (2) performance issues. A contract dispute may include claims from one or both categories.
Breach in the Formation of a ContractA breach in the formation of a contract is just as it sounds. A formational breach is usually based on one party of the contract hiding information, or not fully disclosing information, that was material information or important information to the contract. Additionaly, if available, that information would have either differed material terms of the contract or deterred the aggrieved party from ever accepting the contractual offer. For example, claims may be based on misrepresentation, unilateral mistake, fraud and duress, among various others.
Unfortunately for the aggrieved party, or the party that did not receive what they expected to receive out of the contract, there was no way for them to know that these issues existed at the time that the contract was formed. Thus, a breach of contract claim may be required in an endeavor to either rescind the contract or receive the benefit of the bargain that the party expected, also known as compensatory or expectation damages.
Similarly, an issue may arise during the performance of the contract that alters the benefit that you will receive from the contract. These are still considered formational problems because but for the understanding of the possibility of the event's occurrence, the contract either would not have been entered into or the terms would have been substantially different. For example, claims may be based on mutual mistake or frustration of commercial purpose.
Breach in the Performance of a ContractA breach in the performance of a contract once again may seem obvious. However, a performance breach can occur in a variety of different ways that may cause the allegedly breaching party to either be excused from performance or liable for a failure to perform. Some examples include a failure to complete performance, a failure to perform in a timely manner, a failure to abide by the terms of the contract, defects or issues in the performance of the contract or defects in the end-product of the contract, or a failure to pay, among various others.
Create a timeline of events: There is no race to filing firstSignificantly, it is important that you create a timeline of events that occurred between you and the other party of your contract to help determine who may be at fault. In the vast majority of contract disputes, each party of the lawsuit claim that the other parthe is to blame and is therefore liable for damages. Each party claims that they only refused to perform because of something that the other party did or did not do. As such, before filing a lawsuit, it is important to think about what the other party may say and may be able to prove as the reasoning for why they stopped performing under the contract, etc.
The reason it is so important to anticipate what the other party may allege is because a lawsuit is not simply a race to see who can file the lawsuit first. What I mean by that statement is that you do not avoid liability simply by being the first party to file a lawsuit. The other party will still have the opportunity to respond to your answer, argue affirmative defenses excusing their alleged wrongdoing, and they are likely to additionally file counterclaims, which is the other party's opportunity to file claims alleging that you are actually the party that breached the contract.
Pointing the finger: Proving the finger should be pointed at the opposing partyBoth parties will inevitably point their fingers at each other but if you believe that you are the aggrieved party then filing a lawsuit may be in your best interest. At the end of the day, each party is entitled to full discovery including interrogatories and requests for production of documents, depositions and requests for admissions, These discovery tools are designed to provide you and your attorney with the opportunity to paint a picture to the judge at a motion for summary judgment hearing or bench trial, or a jury in a jury trial, of exactly what occrred between you and the opposing party.
Questions to ask yourself: Did a contract ever exist?(1) Did I make an offer? Receive an offer?
(2) Accept an offer? They accepted my offer?
(3) Was it an oral or written contract?
(4) What evidence do I have to prove the existence of the contract?
(5) What did I promise them?
(6) What did they promise me?
(7) Am I a merchant? Do I usually sell deal with goods of the kind that was the subject matter of this contract dispute?
In sum, a contract requires: (1) an offer; (2) acceptance of the offer; and (3) consideration or promises by each party to do something in return for what they are receiving.
Breach in the Formation Questions to Ask Yourself:(1) Why did I enter into a contract with the other party in the first place? Why did they enter into the contract?
(2) What did I expect to receive from the contract when I signed the contract? What did they expect?
(3) How is what I received from the other party different from what I expected to receive?
(4) Did anything occur between the time that we signed the contract and the contract was breached that made the contract impossible or impracticable for one of us to continue to abide by the contract?
(5) Do I have any reason to believe that the other party expected something to happen? Why?
(6) Did the other party misrepresent any facts to me before entering into the contract or attempt to trick me in any way?
Breach in the Performance Questions to Ask Yourself:(1) Why did I or the other party stop performing? When?
(2) What communications happened between us regarding the issue with performance? Do I have any written correspondence with the other party or internal communications about these communications?
(3) When was performance expected?
(4) Was the date of completion important? Why? Was the completion date’s importance explained to the other party?
(5) Is the performance that I received defective or different from what I expected?
(6) Did the other party fail to abide by one of the terms of the contract? Which term? How?