Most business litigation attorneys will tell you that breach of contract lawsuits are the most common business litigation cause of action in California. Breach of contract encompasses a variety of different scenarios: partnership disputes, breach of lease and other real estate litigation, sales transactions, promissory notes and collections, and any situation where two or more parties have reached an agreement, either orally or in writing.
Every breach of contract lawsuit has to establish the following elements: (1) a contract, (2) plaintiff’s performance of his or her obligations under the contract or an excuse as to why plaintiff did not perform, (3) defendant’s breach of the contract, (4) plaintiff’s damage arising from the breach of contract.
A contract can come in different forms. Oftentimes businesses carry on their transactions with written contracts. However, parties may enter into oral contracts. The law can also imply a contract. This is usually the case when there is no express writing but the parties are engaging in a pattern of conduct which evidence an agreement. For example, where one party performs work and the other party begins paying for that work, a court may imply a contractual relationship between the parties even though there is no express written or oral contract.
The second element of a breach of contract lawsuit is that the plaintiff performed her or her obligations under the contract or has an excuse as to why he or she did not. The idea behind this requirement is that you cannot sue another for breach of contract if you did not perform your obligations under the contract.
In California the third element of a breach of contract cause of action is the other party’s breach. Breach most often includes a failure to pay monies owed, but can take other forms as well. In real estate litigation a tenant may breach a lease, for example, by failing to maintain property insurance, by failing to maintain the property as required by the lease, or failing to follow the rules and regulations. A landlord, on the other hand, can breach a lease by failing to provide the promised amenities. For example, a leaky roof, a broken elevator or a malfunctioning air conditioner could all be breaches of the lease if not repaired.
In other business litigation contexts, breaches of contract can be almost anything agreed to by the parties that one party has failed to perform. Manufactured goods that are defective or late, a partner that fails to perform his obligations to the other partners, a construction project that is improperly built—all of these can be breaches of the agreement between two or more parties.
Lastly, a breach of contract does not create a viable legal cause of action unless the other party is somehow damaged by it. Usually the breach causes damage, such as an invoice that is unpaid, a rented space that is unusable or even profits that are lost due to some act. Depending on the circumstances, a breach of contract action can lead to an award of damages, an injunction (to prevent an ongoing wrong) and even specific performance. Specific performance is often used in real estate litigation since California finds that real property is unique. Therefore a breach of contract to purchase real property can be specifically performed, meaning the court will order the sale or the purchase of the property rather than just awarding monetary damages.