Unraveling the Complexities of Contractual Disputes
February, 2006
by Michael S. Errera and Dean S. Rauchwerger
Getting immersed in a breach of contract dispute, as plaintiff or defendant, is like peeling an onion. There’s always another layer to slowly peel. Below is a practical checklist for deciphering which of the many layers you need to peel for defining the existence and parameters of the underlying promises, conditions and trigger points, and ways to establish or defend claims for breach.
1. Is There A Valid Contract In Play?
• Is the offer sufficiently definite to manifest intent to make a binding contract?
• Did the offeree express acceptance of the offer?
• What are the terms of the contract? Do the parties’ conduct or “course of dealing” evidence a contract?
• Is there valid consideration? Is there a “bargained for” exchange of promises between the parties?
• Did defendant’s promise lead to plaintiff’s detrimental reliance on a reasonable basis - promissory estoppel?
• Is the contract void or voidable because of statute of frauds, fraud, illegality, unilateral/mutual mistake, impracticability, duress, unconscionability or public policy/statutory violations?
2. Whose View Of The Agreement Will Prevail?
• Can you overcome the parol evidence rule barring extrinsic evidence? If so, consider the types of evidence that will bolster your interpretation of the contract and to fill in any missing terms. Is there a “battle of the forms?”
3. Are There Legitimate Excuses To Defeat A Claim For Breach?
• Has each party fulfilled its conditional obligations in order to activate the other party’s duties?
• Does one party’s conduct constitute “substantial performance” so as to defeat claims of breach? Even if so, is there an entitlement for a credit? Are the deviations nominal? Willful?
• Have conditions surfaced that make it “impossible” for performance? Was that condition foreseeable at the front end of the deal?
• Has one contracting party’s conduct prevented the other from fulfilling its contractual obligations?
• Did one party “waive” the other party’s obligations? Are there any legitimate excuses for non-performance?
4. Can You Prove Breach?
• Is the breach anticipatory or active? If anticipatory, is there a paper trail for demanding adequate assurances? See U.C.C. § 2-609(1).
• Did defendant fail to cure its breach? See U.C.C. § 2-508(i).
5. The Ultimate Issue - Damages?
• Is there an enforceable liquidated or stipulated damages provision?
• Recognize that remedies and damages are frequently the “real battleground.” Many variables are potentially in play: market price vs. contract price; lost profits; defendant’s unjust enrichment; is equitable relief, like specific performance, justified; can one party seek rescission; did plaintiff fully mitigate its loss; did plaintiff suffer economic damages; did defendant’s breach cause the alleged damages; are the sought damages sufficiently certain; were plaintiff’s damages foreseeable; etc.
As the onion has too many layers to count, so does a contract dispute. The key is to hone in on the pivotal layers on which your case turns. Without that focus, your efforts and concentration can easily get diverted to the periphery. Understanding what is at the core of your dispute mandates an appreciation of all aspects of the commercial relationship and the deal that evolved. •
Back to CM Report: Business Practice Group Report (2006) 2006 Volume 1 Table of Contents
