At some point, most California business owners face a breach of contract issue. The term “breach of contract” means that one of the parties broke the terms set forth in the contractual agreement. Whether they failed to provide the product or service that was agreed upon or pay for it, a breach of contract arises when one of the parties fails to keep their end of the bargain. Breaches of contract can be detrimental to a company’s bottom line and reputation — and if the issue cannot be resolved between the parties outside of court, it may be necessary to take legal action.
However, in order for the aggrieved party to recover their damages in a lawsuit, they must be able to establish five elements. The elements that must be satisfied for a successful breach of contract claim include the following:
The first issue a court will look at to determine whether there was a breach of contract is whether a contract existed at all. Under California law, a contract must satisfy certain criteria in order to be valid. Specifically, one party must make an offer which is accepted by the other. Additionally, there must be a bargained-for exchange — this means a promise is made in return for something of value.
In California, a contract can be written or implied to be legally enforceable. But under the Statute of Frauds certain contracts must be in writing to be binding, such as agreements which would take more than a year to complete, those involving the sale of goods worth more than $500, and real estate transactions.
The second element that a plaintiff must establish in a breach of contract claim is performance. In other words, they must show that they fulfilled their part of the promise. Or they must demonstrate that performance under the terms of the contract was excused due to the defendant’s nonperformance. Importantly, California courts have held that a party is not excused from performing an act which is not impossible due to difficulty or the party’s inability.
For a defendant to be released from their obligations under the terms of the contract, they must be able to show that any alleged breach by the plaintiff was material, i.e., a significant term of the contract. If the plaintiff’s failure to fulfill their obligations rendered the contract irreparably broken, the defendant will be excused from their obligation to perform.
An unexcused or unjustified failure to carry out one’s performance under the terms of a contract constitutes a breach. A breach can arise from the defendant’s acts or conduct, negligent performance, or failure to perform. Generally, a defendant cannot be held legally liable for a breach of contract until the time of performance. However, a defendant may breach a contract by implied repudiation before the specified time for performance or by expressing a refusal to perform.
Whether a breach of contract is partial or total, a plaintiff has the right to recover their monetary losses in the event they suffered a measurable or tangible injury. Damages suffered by a plaintiff in a breach of contract matter may include monetary losses such as lost profits or other types of harm — including loss of property. Critically, if a defendant breaches its contractual obligations but the damages to the plaintiff are minimal, the harm may not rise to the level necessary to prevail in a breach of contract claim.
In addition to demonstrating damages were sustained, a plaintiff must also establish that the harm was caused by the defendant. A court will analyze two elements to determine causation, including (1) cause of fact and (2) proximate cause. Cause of fact means that the plaintiff would not have been harmed but for the defendant breaching the contract. A proximate cause of damages means something that was a “substantial factor” in leading to the loss. Although California law does not define what constitutes a “substantial factor,” courts have held that it is something more than a trivial or slight factor that produces a certain result.
If you are a corporate owner or entrepreneur, safeguarding your business and its reputation should be your top priority. At White and Bright, LLP our experienced business attorneys skillfully assist business owners in California with a wide variety of business-related matters, including breach of contract claims. We welcome you to contact or call us at (760) 747-3200 to learn more about our legal services.