San Diego business lawyers at Gehres Law Group, P.C. can provide assistance with understanding your obligations under any contracts you have entered into. If you fail to comply with the terms of a legally valid contract your company has signed, you could face a lawsuit for breach of contract. This could potentially result in the court awarding damages to the non-breaching party, and your company would have to comply with the court order providing a remedy for the plaintiff.
It is important to understand the circumstances under which you could be sued for breach of contract as well as possible defenses that you could raise if you’ve been accused of failing to perform according to contract terms.
When Can Your Company be Sued for Breaching a Contract?
The key things that you must evaluate to determine if your company could be sued for breaching a contract include:
- Whether the contract was legally valid. To be valid, contracts must not be overly vague, and they must be entered into willingly by the contracting parties. There must be no fraud, duress, or mutual mistake. There must also be a bargained for exchange in which both parties give something of value, such as mutual promises to perform. Some contracts also must be in writing to be valid, but a written document is not required in all situations.
- Whether the contract was void because it was illegal or against public policy. A contract will not be enforced if it is a contract to break the law or if it is a contract that goes against public policy. For example, courts in California have struck down language in various contract provisions requiring consumers to waive their rights to class actions when they agree to arbitrate disputes because such provisions waiving class action rights are considered to be against the state’s public policy, although the U.S. Supreme Court has recently ruled otherwise in some instances.
- Whether you substantially performed according to the terms of the contract. California Civil Jury Instructions 303 indicate that you must do all of the “significant things” the contract requires to avoid being in breach of the contractual agreement. If your failure to perform undermined the contract’s purpose and went to the heart of the contract, this could be considered a material breach which could give the opposing party more legal options.
- Whether your obligation to perform was conditional and whether the conditions were met. Some contracts will require you to perform your obligations only if certain events occur. For example, in real estate contracts, it is common for a purchasing party to agree to buy a property contingent upon the property passing an inspection. If the property does not pass the inspection, the purchasing party does not have to go through with the sale.
- Whether you have defenses to non-performance. If it becomes impossible to fulfill your contract obligations because of an unexpected intervening event, such as a severe storm that is considered an act of God and destroys property your company was contracted to by or sell, this is a defense to breach.
- Whether the opposing party was damaged by your failure to perform. While an opposing party could sue for breach of contract for a failure to perform even if that party was not damaged, the court can only award a remedy if the plaintiff in a breach of contract claim was harmed in some way. If the non-breaching party suffered no actual loss, even if the non-breaching party prevails in a breach of contract claim, the non-breaching party might be entitled only to nominal damages such as a $1 award.
See our previous discussion on this subject here.
Evaluating whether or not a contract was breached, and whether or not there were damages warranting the time and expense involved in pursuing a claim, are just some of the issues which must be addressed on a case-by-case basis.
Getting Help from San Diego Business Lawyers
San Diego business lawyers at Gehres Law Group, P.C. can evaluate the specifics of your situation, determine if a party is in breach of an enforceable contract, and help you to take steps to protect your legal rights.
We can also assist in negotiating and drafting contracts that protect your rights and put you in the best position possible should it be breached. To find out more about the ways in which our legal team can help you with contract law issues, give us a call at 858-964-2314 or contact us online today.