Contracts are a part of everyone’s life. You might have a contract for cell phone service or to have work completed at your house. For a business owner, the number of contracts, and their importance, increases. They help you to ensure that you receive the products and services you need to successfully run your company. Unfortunately, sometimes the obligations required by a contract are not fulfilled.
Existence of a Contract
The first step in a breach of contract case is proving that a valid and enforceable contract exists. Generally, a contract can be oral, in writing, or inferred from the acts and conduct of the parties. However, in some circumstances something known as the statute of frauds requires a contract to be in writing. For example, the statute of frauds typically applies in the sale or transfer of land. For a contract to be valid there must be consideration, which means the parties must surrender a legal right in exchange for a benefit. If a contract is shown to exist, the next step is to prove the defendant did not perform under the contract.
Proof of Breach
In order to recover, it must be shown that there was a breach of the contract and that the breach was material. A breach may occur if a party does not perform on time, does not perform according to the terms in the contract, or does not perform at all.
The court will consider several factors in determining whether a breach was material, including, but not limited to, the following:
- the extent the other party will be deprived of the benefit reasonably expected;
- the extent to which the contractual obligations have already been completed (the more obligations that have been completed, the less likely a breach is material); and
- the extent to which the party that did not perform comported with the standards of good faith and fair dealing.
The last element that must be shown in a breach of contract claim is damage. The damages must be reasonable reasonably certain to occur. The plaintiff must show the amount of money he or she would have gained had the breach not occurred. Additionally, the plaintiff must search for alternatives to replace the benefit lost. In other words, the plaintiff must attempt to minimize the damage. If there are no alternatives, the plaintiff may recover.
Typically in business settings, compensatory damages are awarded, which are intended to place the plaintiff in the position he or she would have been in had it not been for the breach. Alternatively, specific performance may be requested. This involves the court ordering the breaching party to perform what they had promised in the contact.
Philadelphia Small Business Attorney
Whether it be structuring contracts or pursuing legal compensation for a breach of one, the Philadelphia Small Business Law Center can provide the help your company needs. We have experience addressing all of the legal issues that arise out of owning your own business. If you have any questions, please contact us today.