Contracts are supposed to be binding, legally enforceable agreements between businesses, and they are supposed to provide both parties with rights should any contractual obligation be breached. If you own a business, your contractual agreements are critical to your success – and potentially a hindrance when something goes wrong.
Because breach of contract cases create exposure for damages, taking the right steps to protect your rights and interests is critical. This is why working with proven attorneys who have the experience and resources to effectively advocate on your behalf and the insight to help you make informed decisions can make a difference.
Our Houston business attorneys at Hendershot, Cannon, Martin & Hisey, P.C. leverage decades of experience to help businesses both litigate breach of contract cases and defend against them. We value our important role in the wellbeing of our clients’ businesses, and work zealously to protect their interests, manage risks, and reduce their exposure to damages or the inability to recover. We know how to win these cases.
What Makes a Breach of Contract Case?
In order to win a breach of contract case, there must be a valid claim. To determine this, we focus on the following:
- Evaluate the contract – There are many different types of contracts, from licensing agreements and construction contracts to employment and purchasing agreements. The first and most important step is to evaluate whether there was a valid contract.
- Contractual obligations – When there is a valid contract, it must next be evaluated to determine if the plaintiff fulfilled all of the stipulated obligations.
- Material breach – In order to have a valid claim, a material breach, or failure to perform a contractual obligation. The breach must be material, or a major part of the contract, rather than nominal.
- Damages – The breach of contract must have resulted in damages for the non-breaching party. There must be damages in order for a claim to be valid, even if they are not monetary.
How to Win a Breach of Contract Case
Winning a breach of contract case is always a unique endeavor, as every case is different. Generally, there are a few critical steps to protecting yourself that can be taken at various stages of a contract and when bringing legal action.
- Contract drafting – A carefully crafted, unambiguous contract is a significant step in being clear about the duties and responsibilities of each party. Make sure the terms are very clearly defined, and that they are customized to your situation. Don’t simply turn to the internet and find a form to do it. They are not tailored to your particular needs and many times are unenforceable or cause more harm than good.
- Contract negotiations – Establishing ground rules, such as in the event of a disagreement and how it should be resolved, is important when negotiating the contract. This includes a full assessment of where a dispute will be resolved, what laws will apply, recoverable damages, legal definitions, and more.
- Performance – Performance is a critical aspect while a contract is being fulfilled. If you are on the side contractually obligated to perform, document what you are doing and that you have fulfilled your contractual duty. If you are on the other side, also document any problems with performance, as you will need to insist on performance when the other party is consistently performing under the contract. This creates favorable evidence.
- Evidence – Evidence needs to be truthful, and it should always be preserved. Evidence will be important to demonstrating that one side performed in accordance to a contract, while the other did not.
- Identify witnesses – Successful cases require someone who has seen, and can speak from firsthand experience, relevant facts related to the breach of contract. This can include expert witnesses, or individuals who had direct or indirect involvement. Witnesses will also need to be evaluated to ensure they are as credible as possible.
- Timely file suit – The statute of limitations, or the time in which a claim must be brought before it will be barred by law, will run when the start of the action accrues; the time when you knew or should have known there was a breach of the contract. In Texas, that statute of limitations is 4 years.
Many of the same steps apply for defendants who have been accused of breaching a contract. There are also many affirmative defenses, including ambiguous contracts, mutual mistakes due to a lack of clearly defined conditions, being fraudulently induced into a contract, or estoppel, which prevents plaintiffs from making claims that go against their prior positions. A plaintiff may be estopped when they don’t address the defendant performing under the contract prior to court.
What Damages are Available
Non-breaching parties may be entitled to a recovery of damages when the other party breaches their contract. Because damages are dependent on the individual facts of a contract, contracts must be evaluated to determine if they are available and what remedies are most appropriate. When recoverable damages are available, they may include:
- Actual damages – Actual damages are the monetary damages incurred as a result of a contract breach, such as lost revenue. This is known as your expectation damages and it refers to your financial position should the contract have been fulfilled. Expectation damages are measured by any diminution in value, as well as consequential and incidental damages.
- Reliance damages – Your reliance interest is a measurement for compensation when you suffer financial losses for relying on the party whose lack of contractual performance cost you money.
- Restitution damages – Restitution is awarded to restore you to the position where you were before the contract was formed and breached by the other party, and when you conferred a benefit with the expectation that they would perform. Restitution is calculated based on how much the breaching party gained.
- Quantum meruit – Quantum meruit refers to the recovery of the value of services performed which benefited the other party. The phrase is Latin for “as much as he deserved.”
- Liquidated damages – Liquidated damages are agreed upon during the formation of a contract, and entitles the non-breaching party to recovery for a specific breach. These are common in construction contracts where there is late performance.
- Specific performance – When monetary damages do not make a non-breaching party whole, the breaching party may be required to perform a specific duty, often the contractual duty that was originally agreed upon.
If you would like to discuss a potential breach of contract matter with our Texas legal team, call (713) 909-7323 to request a consultation.