How Do You Handle a Breach of Contract?

two people working on a contractAre you presently part of a contract where the other side is not living up to their side of the deal? Or perhaps worse, is the other side in a contract claiming that you are not performing according to the terms of an agreement? If either of those are the case, he may be involved in a contract dispute. Dickson Frohlich can help.

What Is a Contract?

Contracts are found in a broad array of contexts. While contracts themselves may differ, they all have a few key components: the presence of an offer, the acceptance of that offer, and an exchange of consideration, meaning value such as goods, services, or money. Technically, contract law covers virtually all economic exchanges. Take, for example, the purchase of a hamburger: the restaurant is offering that hamburger for sale; you accept that offer and provide money (value) in exchange for the hamburger.

While some contracts must be in writing to be valid in Washington state, most economic exchanges are not reduced to writing. What that means is that they are largely “oral” in nature. While they aren’t as robust as a written agreement, they can have the same legal impact depending on the parties’ conduct.

Forming a valid contract establishes an enforceable legal duty between the parties. The duty that exists is the obligation that the respective parties have to perform according to the agreement’s terms. Returning to the hamburger example above, suppose the restaurant offered the hamburger for sale, and you accepted that offer and provided money to purchase the hamburger, if it didn’t provide you the hamburger, then that would be a breach of their contractual obligations. (In fact, if they gave you a hamburger that didn’t meet the mutually understood composition of the hamburger, that would be a breach as well.)

There Are Three Basic Elements to a Contract

  • Offer: One party shows a desire to enter into a bargain. It’s in a way that another person would understand that they could accept, ending the negotiations. Offers can be actions or words.
  • Acceptance: There can be negotiations between the parties. The terms of the agreement can’t be too vague to act upon. After an offer is made, the other party can accept it in a reasonable way, including starting performance. The party accepting it can back out up until the performance begins. The acceptance of the contract’s essential terms must be a “meeting of the minds” between the parties.
  • Consideration: There’s an exchange of things that have value. The deal need not be objectively equal, as what matters is what the contracting individual deems to have value.

Do Contracts Need to Be Written to Be Enforced?

There’s a saying that “the faintest of ink is better than the best of memories.” That means that while not all contracts must be in writing, it is universally better if they are. Reducing an agreement to written form clarifies the relative positions of the parties and also compels them to discuss the terms thoroughly. There can also be provisions about how the contract can be changed or ended by one or both parties.

But what about those agreements that, by law, must be in writing? In Washington state, that laws called the Statute of Frauds. Under this statute, the following contracts must be in writing to be enforceable, including:

  • The sale of goods when the purchase price is more than $500
  • The purchase or sale of real estate
  • Real estate brokers’ commission
  • When performance can’t be completed in a year or less according to the terms of the contract
  • Those relating to marriage
  • Settlement agreements of legal claims
  • A security agreement (a promise allowing the creditor to take your assets if you don’t pay what you owe).

If the requirements of a contract are met, other than when the Statute of Frauds applies, a contract can be oral. A binding contract can also be implied by the actions of the parties. This can happen if one party receives a benefit at the expense of the other party, and the circumstances make it unjust for the first party to retain the benefit without payment.

After a contract has been created but one or both parties aren’t doing exactly what’s in the contract, does that mean there’s a breach? No, substantial performance (complying with the material terms) can be enough.

How Do You Claim a Breach of Contract? What Are the Possible Defenses to a Breach of Contract?

If one party doesn’t materially perform its obligations (destroying the contract’s value), the other party no longer needs to hold up its end of the bargain, and the contract is breached. The party harmed can seek compensation for the loss or damages due to the breach from the other party. However, while obtaining compensation from the other party is the most common way a breach is remedied, a harmed party can ask for “specific performance.” Specific performance essentially is what it sounds like, that the party that breached the agreement do what it said it was going to do. In those instances, specific performance is typically appropriate when the subject matter of the contract is unique, or when money won’t solve the breach. Thus wealthy individuals do not obtain an advantage over certain contractual arrangements as they can simply pay for whatever the damages accrue as a result of their breach.

A classic example of this would be purchasing a rare artwork. If a contract forms to sell a rare piece of art, but the seller refuses to hand it over after receiving money from the purchaser, then the purchaser would likely be able to force the seller to give up ownership of the painting through specific performance. The nature of that specific performance would be the court compelling selling party to give up the item to the purchasing party. Now, the purchaser would still need to provide money exchange for that artwork, of course.

How do you claim a breach of contract successfully? You must prepare for the many possible defenses to a breach of contract. Defenses to such a claim could include:

  • There was no offer, acceptance, or exchange of consideration (and thus a contract never really formed).
  • The contract was to do something illegal, so it isn’t legally binding.
  • The party didn’t understand what they did. Minors and those lacking mental competence can’t legally bind themselves in contracts. This is also described as the parties not having a “meeting of the minds” regarding the subject matter of the alleged contract.
  • The contract terms are unconscionable. They’re extremely unjust or overwhelmingly one-sided in favor of the party with greater bargaining power. (Bear in mind that the law doesn’t prevent unwise, or even stupid, contracts. Thus, is not that the agreement at issue is imbalanced or skewed, but it has to be overwhelmingly so.)
  • The contract is the result of fraud or coercion.
  • Both parties made mistakes, so they didn’t agree to the terms. This is often called “mutual mistake.”

How Dickson Frohlich Can Help You with a Breach of Contract Dispute

If you’re a party to a contract and the relationship with the other side has broken down, we need to …

Determine the facts

What was the agreement? Is it a binding contract? How has the party bringing the dispute suffered? If there is a contract, was it breached?

Reach out to the other party

Nearly all legal claims are resolved without going to trial. Can the problem be worked out without resorting to the legal system?

We Can Help You Handle a Breach of Contract

What’s involved may not be a legally binding contract. If you’ve had a loss due to another’s breach, you may be able to claim more damages than you realize. You may have many options to resolve the problem, like negotiation, mediation, and arbitration. Litigation is just one way to handle the dispute.

If you are considering an important contract, the other party has reneged on it, or you’ve been accused of failing to live up to it, engage experienced business attorneys in Seattle to address the situation. Don’t put your financial security at risk. The lawyers of Dickson Frohlich have decades of experience in contract law. We can put our expertise to work for you. Call now at 206-429-6931 for a phone free 15-minute consultation.