Contractual agreements are legally binding. When one party refuses to fulfill their obligations under a legally binding contract/ agreement with another party, a breach of contract is said to have occurred. The breach can take various forms, including failing to deliver goods or services as promised, not paying for goods or services received, reneging on a property sale agreement, or failing to perform a specified duty.
When a violation of a contractual agreement occurs, the non-breaching party has legal remedies available. The plaintiff can seek damages or specific performance. The particular remedy available will depend on the nature of the breach and the terms of the contract. The Los Angeles Business & Real Estate Law Firm will help you find the ideal legal remedy.
Components that Constitute a Breach of Contract
You must prove critical components to establish that a violation of a contractual agreement occurred. These elements are:
- The existence of a valid contract
- The plaintiff’s excuse for nonperformance or performance
- The defendant’s breach
- Damages
- Valid Contract
Per Civil Code 1549, a contract is an agreement between two or more parties that creates obligations to do or not do a particular undertaking. The definition incorporates both express and implied contracts.
Express contracts are those where the parties explicitly state the terms and conditions of the agreement, either in writing or verbally. Implied arrangements, on the other hand, are those where the terms and conditions of the agreement are not explicitly stated but inferred from the parties’ actions.
For a contract to be considered valid, it must meet specific requirements. These include:
- Mutual consent — All parties must agree to the contractual terms voluntarily and without coercion.
- Consideration — There must be value exchanged between the parties, for example, money, goods, or services.
- Capacity — All parties must be legally able to enter into a contract, meaning they are of legal age, mentally competent, and not under duress or undue influence.
- Legality — The purpose of the contract must be legal and not against public policy.
Political Candidate Agenda to Constituents
In Schaefer vs. Williams (1993), the court held that political candidates could not be liable for violating a contract for failing to follow campaign promises. The court observed that the pledges lack a minimum of two parties to form a contract.
In other words, campaign promises are not considered legally binding contracts. They do not involve a meeting of the minds between two or more parties, which is necessary to form a contract.
Promise to Refrain from Illegal Conduct
A commitment to refrain from illegal conduct is an unlawful consideration. This means a contract with such a promise as consideration is illegal and, therefore, void. This principle is based on public policy considerations that aim to discourage parties from engaging in unlawful activities.
The Planned Parenthood Federation of America, Inc. vs. Center for Medical Progress case exemplifies this principle. The court held that a contract between two parties was void because it included a promise by one of the parties to refrain from engaging in unlawful conduct as consideration. The court noted that the promise to refrain from illegal conduct was illegal. Therefore, the contract was unenforceable.
Severable Contractual Agreement
A contract can be classified as severable if it comprises multiple distinct parts or obligations that can be independently performed. In these cases, the plaintiff’s inability to demonstrate a violation of a contractual agreement for one component of the severable contractual agreement does not automatically preclude them from seeking damages for violating another part. Each contract element is considered separately and evaluated based on its merits.
Armstrong Petroleum Corporation. vs. Tri-Valley Oil and Gas Company illustrates severable contracts. The court held that a lawsuit for violating a gas and oil operating contract had not expired since the deliveries or monthly payments constituted a string of distinct and separable contractual obligations. Even if the plaintiff could not prove a violation of a contractual agreement for some of the deliveries or monthly payments, he/she could still recover damages for breach of other obligations under the contract.
- Plaintiff’s Excuse for Non-performance or Performance
In a violation of a contract claim, the plaintiff should establish that they performed their obligations under the contract. Alternatively, they must prove that their default on an obligation was excused. This means that the plaintiff should demonstrate that they fulfilled their portion of the agreement or had a valid reason for not doing so.
Proof of Performance
Brown vs. Grimes provides an example of performance. The court ruled that a party must fulfill all the conditions or requirements outlined in a contract before they can compel the other party to perform an obligation. This implies that if a contract includes terms or prerequisites that a party must meet before demanding performance from the second party, they must satisfy those conditions or requirements themselves.
Excuse for Non-Performance
Should the defendant obstruct the plaintiff’s ability to fulfill their contractual obligations, the plaintiff should mention this justification for their failure to perform in their complaint.
In Durell vs. Sharp Healthcare, the plaintiff alleged that the defendant had stopped him from performing his obligations as per the terms of the agreement by failing to provide certain information and materials. The court held that the complaint must explain the failure to perform as an excuse to maintain his breach of contract claim.
If a party cannot perform their obligations under a contract because the counterparty has prevented them from doing that, they must include this allegation in their complaint to pursue a claim for violating a contractual agreement. Failure to include this allegation could result in the claim being dismissed.
The Defendant’s Hindrance of Performance
The courts in Hale vs. Sharp Healthcare held that if a party to a contract prevents the second party from performing their obligations under the agreement, the prevented party is excused from performance. This principle applies even if the prevention of performance was due to a failure to fulfill a prerequisite of the preventing party’s obligation under the contract.
This principle underscores the importance of fulfilling one’s responsibilities according to contractual obligations. Doing so ensures that the second party can perform their obligations as well. If one party fails to fulfill their duties, they risk breaching the contract themselves and preventing the counterparty from performing their contractual obligation. This act will create potential liability for breach of contract.
Waiver of the Defendant’s Performance
The County of Solano vs. Vallejo Redevelopment Agency case held that a defendant could relinquish a plaintiff’s performance per the contractual obligations or additional prerequisites should the performance or terms exclusively benefit the defendant.
This means that if a particular performance or condition only serves the defendant’s interests and does not benefit the plaintiff, the defendant can waive that performance or condition. The plaintiff will still be considered to have fulfilled their obligations under the contract.
Excused Performance if Performance Becomes Impossible
According to the ruling in Maudlin vs. Pacific Decision Sciences Corporation, if the presence of a particular issue is deemed the foundation of a contract and performance under that contract is dependent on that aspect, then the performance can be justified if the subject stops to exist or is discovered not to exist.
Performance is Not Excused Due to Performance is Challenging
In Lapid vs. Diagnostics (2006) Cal.App.Unpub. LEXIS 10746, the court held that if a party to a contract agreed to execute an act without any qualification and the deed is not impossible, that party cannot be excused from acting simply because it becomes difficult or they become incapable of performing. This decision was outlined in Caron vs. Andrew.
Frustration of Purpose
In situations where performance is still likely, but the purpose of the contract has been hindered by an unforeseen event that substantially diminishes the significance of the party’s performance, the doctrine of frustration can be applied to excuse performance. This is known as the “frustration of purpose” doctrine.
An example could be a contract to use a venue for a specific event. The location is destroyed by fire before the event can take place, making the purpose of the contract impossible to fulfill. This was the finding in Habitat Trust for Wildlife, Inc. vs. the City of Rancho Cucamonga.
Anticipatory Breach
Per Central Valley General Hospital vs. Smith, when a party refuses to fulfill their contractual obligations before the performance deadline, it is referred to as an anticipatory breach. In this scenario, the other party can consider the contract voided and pursue legal action to recover damages without waiting for the performance deadline.
Plaintiffs Breaching Contracts
According to Plotnik vs. Meihaus, if a plaintiff violates a contract, they are not entitled to seek compensation for a subsequent significant breach committed by the second party. This principle is based on the doctrine of “unclean hands,” which precludes a party engaged in wrongdoing from seeking equitable relief from a court. Therefore, if a plaintiff breaches a contract, they could forfeit their right to sue the second party for any subsequent breach. However, if the plaintiff’s breach was minor and did not affect the core of the contract, they could seek damages for the counterparty’s subsequent material breach.
- Defendant’s Breach
When a defendant breaches a contract, the plaintiff could be entitled to sue for damages or seek other legal remedies, depending on the specific terms of the agreement and the nature of the breach. A defendant’s breach occurs when a party to a contractual agreement fails to perform its obligations under the contract.
No Breach Except for When Performance is Due
In McCaskey vs. California State Automobile Association, the courts established that a defendant could not be held accountable for violating a contract until the performance deadline stated in the agreement had passed. This means that until the period for performance passes, there can be no breach of the contract. In other words, a party cannot be held liable for failing to perform a contractual obligation until the period for performance comes and goes.
This principle is based on the idea that a contract is an agreement to do something in the future, and until that future arrives, there is no obligation to perform.
Breach of Implied Repudiation
In Martinez vs. Scott Specialty Gases, Inc., the court held that should the defendant willingly make it impossible to perform their obligations under the contract, they are considered to have breached the agreement through a repudiation that was not expressly stated but implied. The breach occurs if the time for performance is yet to arrive. The defendant has essentially communicated their intent not to perform the contract.
Breach When is Improbable
Should the defendant not fulfill their obligations under a contractual agreement, even though they do not overtly reject the agreement and indicate their intent to perform, the plaintiff could still regard the default on an obligation as a complete breach of the contractual agreement. However, the plaintiff should reasonably believe that the defendant is unlikely to perform or will only do so when it suits their convenience. The case of Mammoth Lakes Land Acquisition, LLC vs. Town of Mammoth Lakes establishes this principle.
Non-perform of Further Conditions Does Not Amount to a Violation of the Primary Contract
The defendant’s responsibility to fulfill their obligations is restricted to the provisions outlined in the contract. If you fail to meet the obligations related to other agreements irrelevant to the contract, your action does not qualify as a breach of the contract.
- Damages
In a violation of a contractual agreement case, damages are meant to compensate the non-breaching party for the loss suffered due to the breach. The damages awarded should place the non-breaching party in the position he/she would have been in if the contract had been fully performed. Several types of damages can be awarded in a breach of contract case, including:
Compensatory Damages
According to Civil Code 3300, the compensation awarded for a violation of a contractual agreement is the sum that would compensate the aggrieved party for all losses directly resulting from the breach or that would typically arise from the breach. This is commonly called the standard measure of damages for contract violations.
Restitution/Restoration
Restitution is a legal recourse to return the aggrieved party to their pre-contractual state. This remedy mandates that the party who violated the agreement return any money or property received as a result of the contract. Its primary objective is not to compensate for damages beyond the actual worth of what was obtained. This principle was established in Ajaxo Inc. vs. E*Trade Group Incorporated.
Certainty
The injured party must prove the damages with reasonable certainty. Further, he/she must also establish that he/she cannot recover speculative or uncertain damages. The damages must be ascertainable in origin and nature, and the evidence must be sufficient to enable the court to determine the value of the damages without speculation or conjecture.
Lost Profits
The evidence must establish with reasonable certainty the damages and their worth. Doing so can help you recover lost profits. The plaintiff should demonstrate that the gains were reasonably sure to be earned but for the breach and that losing profits can be traced to the breach with reasonable certainty.
Rescission
If a violation of a contractual agreement has harmed one party, they could treat the contract as terminated. In these cases, the party can seek damages resulting from the rescission if they are unable or unwilling to continue with the contract. This remedy is called restitution, which aims to restore the injured party to their pre-contractual position.
Restitution aims to return the parties to the status quo ante as if the agreement had never occurred.
Specific Performance
A plaintiff seeking specific performance as a remedy for a breach must demonstrate that their legal remedy, typically an award of monetary damages, would be inadequate to compensate for the harm caused by the breach. This is because specific performance is considered an equitable remedy available only in certain circumstances where monetary damages are insufficient. The burden of proof is on the plaintiff to show that a particular performance is appropriate under the circumstances.
Specific Performance in Transfers of Real Property
According to Civil Code 3387, when there is a contract to transfer property, it is generally assumed that monetary compensation will not be enough to remedy a contract violation, except in specific situations. This presumption is considered definitive when the property is a stand-alone house that the party pursuing performance plans to use as their primary residence.
Furthermore, this presumption affects the burden of proof in further cases. As a result, this presumption simplifies the process for a party seeking specific performance of a contract to assign ownership of the real property to obtain that remedy.
Injunction
Trial courts have the discretion to grant injunctive relief. It is based on a balancing of equities. Injunctive relief could be granted where damages are inadequate to compensate the plaintiff, and the adverse effects on the defendant of imposing the relief are not disproportionate to the benefit to the plaintiff.
Deadline for Filing a Lawsuit
The statute of limitations varies depending on whether the contract is oral or written. For oral contracts, the period is 2 years, per Civil Procedure 339(1). On the other hand, the period for written agreements is 4 years, per Civil Procedure 337.
Find Legal Assistance in Business and Real Estate Transactions Near Me
You need qualified and experienced attorneys to help navigate contract law. At the Los Angeles Business & Real Estate Law Firm, we will guide and protect your interests in your business and real estate undertakings. Contact us at 310-796-7794 to discuss your specific needs and explore your options.
