Breach of Contract
A breach of contract lawsuit can take many forms. The contract might be oral or written; the claim can be for failing to deliver a good or service or delivering substantially less than what was promised, and the breach might be a one-time event or continuing. Generally, a claim for breach of contract must be for failing to abide by a material term of the contract. However, continual breaches of minor provisions of a contract can become actionable if it materially affects the contract.
Damages for Breach of Contract
Damages in a lawsuit for breach of contract can cover several categories. The most common is consequential damages or the money lost because of the breach. This puts the non-breaching party in the position they would have been if the contract was not breached. Other damages can include lost profits, lost opportunity costs, money lost in reliance on the contract, damage to reputation and other money lost because of the breach of contract.
Things to Remember
A few things are important if you're involved in a dispute about a contract before it progresses to a lawsuit:
- Put it in writing. It's important that any alleged breach of contract is clearly and succinctly communicated in writing at the first opportunity.
- Don't fail to act. Allowing a party to continually breach the contract can operate as a waiver in some cases. It's important to address any breach of the contract immediately.
- Keep track of your damages. If you have to expend extra labor to deal with the issue, keep track of it. It's important to track any expenses or loss of business incurred because of the breach.
- Mitigate your damages. As much as possible, try to mitigate any damages you suffer because of the breach. This might include hiring someone else to do the work you contracted for instead of losing profits every day waiting for the breaching party to perform on the contract.
- Keep everything. Don't inadvertently lose emails or important documents. Not only will this adversely affect your ability to prove your case, it can also lead to sanctions or an adverse inference at trial.
Significant issues that come up with lawsuits for breach of contract include:
- Mandatory Arbitration. If a contract has a clear and unambiguous arbitration provision, a court will usually enforce this and require the parties to a trial before a neutral arbitrator (or a panel of arbitrators). Generally, both parties have to pay for the arbitrator, there is no jury trial and the right to appeal an adverse decision is severely restricted.
- Attorney’s Fees. If the contract provides that the losing party has to pay the winning party’s attorney’s fees, this is usually enforced. Some contracts provide for attorney’s fees if only one party to the contract wins and not the other. In Colorado, this is generally enforced (in other states, like Florida, it is read into the contract that the losing party pays if there is any attorney fee provision in the contract).
- Forum Selection Clauses. The contract may have a provision that any legal proceeding brought under the contract must be brought in a specific forum. For instances, all claims must be brought in a court of competent jurisdiction in Denver, Colorado. These are usually enforced. I’ve seen contracts where a forum is selected for disputes where neither party has a connection to the city and this is enforced by the courts.
- Liquidated Damages. These are somewhat less common although they are more common in construction contracts. A liquidated damages clause means that the damages for a breach of contract are calculated by a method or a dollar amount designated in the contract. There are several exceptions to the enforceability of the liquidated damages clause. For instance, they can’t be arbitrary and bear no relation to anticipated actual damages.
Can I recover emotional distress for breach of contract?
Generally, no. These types of damages (non-economic damages) for breach of contract are only available in extraordinary circumstances. This usually means that the emotional damages are foreseeable at the time the contract was made and the breach of contract was willful and wanton. In most contract cases, these damages are not available because they are not foreseeable at the time a contract is entered (the parties contemplate, at most, economic damages).