What Are the Elements of a Breach of Contract Claim?
Jan. 6, 2023
Relationships are the building blocks of any business. Clients and customers, of course, are needed if you want any chance of success, but beyond that, a business needs to build relationships with others, including employees and outside parties who supply goods and services.
When it comes to agreements with those who will supply products to sell, or who will provide needed services such as accounting, tax filing, or even nightly clean-up, they will often take the form of a legally binding contract.
A contract can begin with a simple handshake. You as the business owner may not think much of the handshake other than: “Okay, let’s do business together. You do this, and I’ll pay you for it.”
However, with that handshake, you may have entered into an oral contract. Other times, your accountant, or even your vendor, may insist on getting everything in writing. This then becomes what is called an express, or written, contract.
The major difference between these two types of contracts is that an oral contract relies on each party’s interpretation of what was agreed upon. Therefore, if a dispute ends up in court, it might prove hard to show who broke which aspect of the agreement. For example, you may have lost $100,000 in business because the other party failed to deliver what was promised, but the other party can argue that the delivery wasn’t due or that you failed to carry out your part of the bargain.
In contrast, a written contract, so long as the terms are clearly spelled out, will indicate the rights, duties, and obligations of the parties entering into it. If a dispute for, say, a breach of contract ends up in court, then the clarity of the written instrument can make it easier to prove who broke which term and who was harmed by the breach.
If you and your business find yourselves involved in a breach of contract situation, whether you are the one accused of the breach or the one harmed by the breach, contact the business litigation attorney at The Parzivand Law Firm, PLLC.
Proving a breach of contract in a court of law can be complex and challenging, especially in cases of an oral contract where a virtual “he said/she said” standoff can occur. The attorney at The Parzivand Law Firm, PLLC will analyze the situation and advise you of the best strategy going forward, and then aggressively represent you.
The Parzivand Law Firm, PLLC proudly serves clients in Stafford, Texas, as well as those in Sugar Land and throughout Fort Bend County.
What Is a Breach of Contract?
A breach of contract means, in a nutshell, that one party to the agreement failed to live up to their obligations, and as a result, the other party was harmed. Say you run an electronics store where one of your best sellers is a video security device that captures what’s going on in and around your home or business.
You have a contract with a vendor to supply X number of these devices on the second Tuesday of each month. The second Tuesday comes and there’s no delivery. Another Tuesday comes and there’s still no delivery, and meanwhile, your customers are growing antsy waiting for what they came in to buy. You’re losing customers and revenue, so your business is being harmed.
This can be the basis for a breach of contract action unless the supplier can provide a valid reason for the delay; for instance, the manufacturer is being picketed during a labor action, and production is slow to nonexistent. Or, the supplier, instead of delivering on the second Tuesday, delivers on the third Monday because of weather conditions. Your business may have been slowed, but it’s back on track a few days later.
These situations draw up the distinction between a minor or immaterial breach (which usually is not actionable) and a material breach. If the shipment is just a few days late, then it’s probably a minor breach, but if the shipment is delayed long enough that you lose customers, and your revenue base is threatened, then it might be material. Even here, though, if the supplier makes a good faith effort to obtain your products through another channel, the delay may not rise to the material level.
This is where the strength of having a written contract comes into play. A solidly crafted written contract will spell out exactly what each party should do if some obstacle or other factor prevents them from carrying out their part of the agreement.
This is also why contracts should be drafted with the help of an experienced attorney to make sure both parties’ rights and obligations are crystal clear. A downloaded contract where you just fill in the blanks could prove a liability to one or both parties if matters escalate into a breach of contract dispute.
Elements of a Breach of Contract
Texas law requires the proof of four elements to bring a civil action for a breach of contract. These elements are:
THE EXISTENCE OF A VALID CONTRACT: Whether oral or written, a contract must contain an offer and an acceptance of the offer, along with consideration. For instance, the electronics store owner approaches Vendor A to supply video security cameras. The two agree. Consideration means Vendor A will supply X number of cameras on a specified basis (daily, weekly, monthly, etc.), and the store owner will pay X number of dollars for the cameras.
ADHERENCE TO THE CONTRACT: The plaintiff must be able to show that they adhered to the terms of the contract, or were excused from doing so because of circumstances.
FAILURE BY THE OTHER PARTY TO ADHERE TO TERMS: The plaintiff must show that the defendant failed to adhere to the terms of the contract.
DAMAGES RESULTED: The plaintiff must show that actual damages, such as lost revenue, occurred as a result of the breach.
Understanding Anticipatory Repudiation
Anticipatory repudiation, or an anticipatory breach, occurs when one party involved in a contract demonstrates, through words or actions, that they will not be able to fulfill their contractual obligations. This is considered a repudiation of the contract, and it gives the other party a 30-day window to demand “adequate assurance of performance.” If no assurance is forthcoming, then a lawsuit can be filed after those 30 days have gone by.
The repudiation, however, must be clear and unambiguous. The supplier of video cameras must say, in essence, “I’m not going to be able to do this.” If the statement is more ambiguous such as, “I won’t be able to do this if my workers go on strike,” then that would not rise to the level of an anticipatory breach.
Protect Yourself & Your Business in a Contract Dispute
If you have existing contracts that were not personally reviewed or drafted by an attorney, you should get them reviewed immediately. If they are oral contracts, you and your attorney should review the agreements with the goal of transferring them into writing so that everyone’s rights and obligations are clearly spelled out.
In other words, take the necessary steps in advance of disputes to make sure your interests are well represented and protected through a clearly drafted written contract. Furthermore, if you are looking to take legal action for a breach of contract, or if you yourself are being accused of breaching a contract, consider seeking out professional legal guidance.
If you’re located in Stafford, Sugar Land, or anywhere in Fort Bend County, Texas, contact The Parzivand Law Firm, PLLC to discuss your situation, and take the steps necessary to protect yourself and your business.