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General Outline of Breach of Contract Law
A contract is an agreement between two or more parties to do or not to
do something. Three elements are needed for a contract to have been formed:
1) a meeting of the minds on the terms and conditions of the contract;
2) intention of the parties to be bound; 3) the contract was supported
by consideration. A contract may be implied. A contract may be oral.
A breach is simply a failure to fully perform a duty owed under a contract
when the failure was without legal excuse. Two types of breach exist:
what is called a material or total breach and what is called a simple
or partial breach. A material breach is when the duty not performed is
so important that it affects the central purpose of the contract. If a
contract has been materially breached, then you are excused from performing
your part of the bargain, you may end the contract, and you may seek damages.
If you received substantially what you bargained for, then the breach
was only a simple breach. You are not permitted to end the contract, but
you can seek damages.
Either type of breach may occur by anticipation where words or conduct
indicates the other party will not perform. A party may breach a contract
by preventing a condition from occurring. You may be excused from performing
a contract if it would be impossible to do so and the impossibility was
not foreseeable.
You are also excused from performing under a contract where there was
fraud in the inducement - the other party willfully made false representations
of material facts causing your damages.
Damages for Breach of Contract
The first thing to know about damages is that if the other party has
breached, you have a duty to mitigate damages. Even if the other
party has breached, you cannot delay in taking reasonable steps to avoid
impending damages.
You will be entitled to an amount necessary to place you in the economic
position you would have been in had the contract not been breached. In
general, calculate damages by calculating the amount of money or value
you would have received had the contract not been breached; add incidental
damages; add consequential damages, if any; subtract any money you saved
since you did not have to complete the contract. As you can see, often
the damages for a breach are little or none.
Since consequential damages must be foreseeable at the time of the contract,
it is generally a good idea to make the other party aware as soon as possible
the extent and types of damages you will incur if he continues with the
breach.
You cannot recover damages that are speculative or based on guesswork
or conjecture. In many instances, this rule precludes the recovery of
many elements of damage. This rule often limits recovery in lost profits
sought by a new business since such profits are considered merely
speculative. If the business is an ongoing business with a history of
profits, damages may well include loss profits suffered through collateral
contracts or from collateral sources if otherwise foreseeable and proved
with certainty.
You may have the right to specific performance of the contract if the
goods or services are "unique." This would include heirlooms,
priceless works of art, output and requirements contracts, situations
where the goods cannot be "covered" or replaced.
Some contracts contain a liquidated damage provision specifying the amount
of damages or types of damages if the contract is breach.
Under certain circumstances a breach of contract may also give rise to
a tort cause of action and damages as well. For example, if the other
party is to process your loan application and negligently fails to do
so.
SAMPLE COMPLAINT FOR BREACH OF CONTRACT
1. Jurisdiction of this court is founded on D.C. Code Sec. 13-421
2. Powerhouse Ltd. is a District of Columbia limited liability company.
3. Electric Supply Co. Inc. is a Maryland corporation.
4. Utility Co. Inc. is a Delaware corporation.
5. On or about 10 February 2005, Electric Supply and Powerhouse entered
into a verbal joint venture to purchase a windmill owned by Utility in
order for the joint venture to resale the windmill.
6. Electric Supply and Powerhouse had entered into similar joint ventures
several times in the past.
7. Plaintiffs allege on information and belief that Utility had on some
time before 10 February 2005 entered into an agreement to buy the windmill
since it was not the owner.
8. On 15 February 2005, an agent of the Electric Supply-Powerhouse joint
venture met with an agent of Utility and agreed, substantially, that the
Electric Supply-Powerhouse joint venture would buy the windmill for $500,000,
$50,000 down, buyer obliged to remove the windmill within 180 days of
1 April and to pay the balance of the purchase price before the end of
the 180 days and before removal.
9. The two men shook on the deal.
10. Before entering into the deal, the agent for the Electric Supply-Powerhouse
joint venture made known to Utility's agent that the Electric Supply-Powerhouse
joint venture was purchasing the windmill for speculative purposes and
would be reselling it for a profit.
11. The following day, the Electric Supply-Powerhouse joint venture wrote
a contract reflecting the previous day's verbal agreement, signed it,
and faxed it to Utility.
12. On 16 February, the Electric Supply-Powerhouse joint venture wired
Utility the $50,000 down payment.
13. An agent for Utility signed the contract.
14. The Electric Supply-Powerhouse joint venture alleges on information
and belief that later when Utility negotiated with the owner of the windmill
to purchase it, Utility learned that the owner insisted that the windmill
be removed within thirty days.
15. When the Electric Supply-Powerhouse joint venture refused to modify
the agreement, Utility repudiated by anticipation the contract by notifying
the joint venture that Utility would not honor the agreement.
16. Utility returned the $50,000 down payment.
17. Before the Electric Supply-Powerhouse joint venture learned of Utility's
repudiation, the joint venture had incurred $20,000 in costs and expenses
in advertising the windmill for sale.
18. During the 180 day period, the joint ventures could resale the windmill
for approximately $1,500,000 while incurring selling costs and expenses
of approximately $25,000 not including the $20,000 in costs and expenses
already incurred, thus making a net profit of $955,000.
19. By reason of the foregoing facts, the Electric Supply-Powerhouse joint
venture has been damaged in the sum of $955,000, consisting of $20,000
of advertising expenses already incurred plus $1,480,000 in lost net revenues
from resale minus $25,000 in selling cost and expenses avoided, minus
$500,000 in contract payments.
Wherefore plaintiffs demand judgment against defendant for the sum of
$955,000, with interest and costs, representing:
A. $20,000 in compensatory damages, general and special, for advertising
expenses;
B. $935,000 in compensatory damages, general and special, for lost net
profits.
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