As I write this article, I am in the midst of prosecuting a multi-count civil claim, on behalf of three plaintiffs against several defendants, under a variety of contract breach and fraud counts. The case touches on a number of issues that are common in business disputes and provides a useful “case study" that might prove valuable to business owners.
Like many commercial litigation cases, this claim alleges the following business counts:
breach of contract,
breach of covenant of good faith and fair dealing,
fraudulent nondisclosure, and
The plaintiffs’ claims are for actual and consequential damages in an amount to be proven at trial, and for an award of punitive damages in an amount sufficient to deter the defendants from committing similar torts in the future.
Each of the above counts contains elements for which, generally, the plaintiff bears the burden of proof. The extent of the plaintiffs’ burden varies from count to count. For simplicity, I will review a couple of the above counts only, differentiating between a contract-related count and a tort-related count (e.g., fraud).
In contrast to a criminal case, in which the government must prove guilt beyond a reasonable doubt, in a claim for breach of contract the plaintiff generally must justify its claims merely by a “preponderance of the evidence" – i.e., by showing that the claim against the defendant is more likely true than not. The types of evidence to be shown in a contract claim are:
existence of a valid contract,
a breach by the charged party, and
Over the years, a multitude of defenses has developed in case law that might offset or negate these elements, such as equitable defenses of unconscionably, illegal objective, “unclean hands," anticipatory repudiation, impossibility/impracticability of performance, frustration of purpose, and so on.
The standard is higher in tort claims and certain statutory claims, where the burden of proof is by “clear and convincing evidence." This is a much more stringent measure of proof that lies somewhere between “preponderance" and “beyond reasonable doubt." The elements comprising a business tort claim, such as fraud, are greater in number, and the measure of the level of proof (preponderance vs. clear and convincing) may vary based on the nature of the relationship between the parties (arm’s length vs. confidential, fiduciary relationship, etc.). These elements generally include:
the speaker’s knowledge of its falsity or ignorance of its truth,
the speaker’s intent that it should be acted upon by the person in the manner reasonably contemplated,
the hearer’s ignorance of its falsity,
the hearer’s reliance on its truth,
the hearer’s right to rely thereon, and
the hearer’s consequent and proximate injury.
Prior to deciding to pursue any claim such as the above, it is essential that you first do a comprehensive analysis in order to determine if you have the provable facts necessary to support the claim. If you do not have this proof, wait until you can develop those necessary proofs or pursue a different direction. You simply do not want to learn of a factual deficiency after getting financially enmired in litigation.