When a contract is broken (breach of contract)

A breach of contract case is a case when an agreement or contract is broken (breached). The agreement can be in writing, it can be verbal, or it can be implied from the situation. In these cases, one side argues that the other side broke their agreement and it hurt them in some way.

• What's a contract and breach of contract
• Basic things to consider before suing
• Forms you can use for a breach of contract case
• Things you may want to talk to a lawyer about

What's a contract and breach of contract

A contract is an agreement between two or more parties where each party agrees to do, not do, or pay something according to the terms of the agreement. The agreement can be written, it can be verbal, it can be verbal but have some documents that show its existence, and it can be implied from the situation.

To sue someone for breaking a contract, there needs to be a valid contract

For a contract to be legally binding and enforceable (which allows someone to sue in court), there must be:

A mutual agreement: Both sides must agree to be bound by their contract and must agree on the essential terms.

An offer and an acceptance: One side makes a clear or definite offer and agrees to be bound by the contract and the other side clearly accepts that offer and to be bound by the contract

Consideration: Each party to a contract must give something of value to the other. This can be legally complicated so talk to a lawyer if you’re not sure if something of value was exchanged in your situation.

Capacity by all parties: Each party must understand what they’re doing. If someone is a minor or does not have the mental capacity, there may not be an enforceable contract.

Legal purpose: The purpose of the agreement must not break the law. A judge can't enforce a contract to do something illegal, like sell illegal drugs.

Additionally, some types of contracts must be in writing. For example, a contract to buy or sell real estate or that the terms call for carrying on more than a year must be in writing. If you are not sure if the contract must be in writing, get help from a lawyer.

A breach of contract is when one party to the contract doesn't do what they agreed

Breach of contract happens when one party to a valid contract fails to fulfill their side of the agreement. If a party doesn’t do what the contract says they must do, the other party can sue.

You lend a friend $15,000. You both make a verbal agreement that your friend will pay you within 6 months. 6 months go by and your friend refuses to pay you. You can sue your friend for breach of contract because they did not do what you both agreed.

You hire a licensed contractor. Halfway through the project, the contractor walks away from the job. You have to hire a new contractor to finish the job and fix some shoddy work from the first contractor. You can sue the first contractor for the money you paid that they did not do the work for, repairs the new contractor had to do, and any other damages you have suffered like costs related to the delay, higher costs for materials, etc.

There are some common defenses to breach of contract

The defendant may argue:

• They did do what your agreement says. This is common in cases where there's a disagreement about what one side agreed to do. For example, a painter agreed to paint the inside of your house. You paid in advance. They painted it with 1 coat of paint. You can still see the old paint through it and you say the painter should have known to paint 2 coats. The painter might argue they did what they said they would, paint the house.
• You broke the agreement first or it's your fault they couldn't do what they agreed to do. For example, you have a contract with a flooring company to replace all of your flooring. You agree that by Saturday at 8am you will have the house emptied out so they can do their job. They agreed to re-do the flooring of the house by 5pm on Sunday. But, you don't empty the house til Saturday at 4pm. The flooring company may say they couldn't do what they agreed to because you were late emptying out the house.
• The contract was supposed to be in writing. This is called the Statute of Frauds, this laws require certain contracts to be in writing. This can be legally complicated so talk to a lawyer if the defendant argues the contract was supposed to be in writing.
• The contract is indefinite—meaning that essential terms of the contract were never agreed to, like if you did not consider the deal to be final, or if a court would not be able to sort out the essentials of the contract.

If you're being sued for a breach of contract because you haven't paid on a debt you owe, check out the debt collection information.

Basic things to consider before suing

You have to sue before a deadline (statute of limitations)

For a written contract, you generally must file your lawsuit within 4 years of when the agreement is broken. For a verbal contract, you must file it within 2 years of when the agreement is broken. If you're defending yourself and the lawsuit was not filed within the deadline, you can ask the judge to dismiss the case.

Check if your contract says anything about what happens if there's a breach

Sometimes a written contract will have language that says what can happen if one side sues the other.

Arbitration or mediation: A contract may say you must go to arbitration or mediation before you can sue or be sued. It might even say arbitration is the only option.

Venue and choice of law: The contract may say either side has to file a lawsuit in a particular state with the laws of that state, not California.

Attorney fees and costs: The contract may say that if one side sues the other, the side that loses pays the other side's attorney fees.

Where to sue (venue)

For a breach of contract case, the county where the case has to be filed can be any of these places:

• Where the defendant lives or does business
• Where the contract was made
• Where the contract is to be (or was) performed
• Where the contract was broken

Who to sue

You need to sue the person or business who signed or entered into and then breached the contract. Generally, s omeone cannot sue a third party they do not have a contract with. Only the one who signed or entered into the agreement with you is responsible for the damages to you.

You sign a contract with a cabinet store for kitchen cabinets to be delivered by a certain date. The cabinet store is not the one that’s making the cabinets. They are just the ones selling them to you. They have a cabinet maker they contract with. If the cabinet maker ends up getting really delayed or does shoddy work, you can sue the cabinet store for breach of contract but not the cabinet maker, since your agreement is with the cabinet store.

What are the legal reasons for the lawsuit and what is the proof

A plaintiff needs at least one legal reason, called a cause of action, to file a lawsuit. Every part (element) in that cause of action has to be proven. The defendant should also be aware of what the plaintiff needs to prove and how they can defend themselves.

What damages were suffered

This could be as straightforward as only the money you’re owed from an unpaid loan plus interest, or the money to buy a product from someone else. But it could get more complicated if the breach caused delays that cost you money, or if the breach caused you to have to hire someone else to do repairs to the work you already paid for. The law limits the types and amounts of damages that can be claimed in a breach of contract case. Basically, the law wants to put the non-breaching party where they should have been if the contract had been performed. Sometimes this is called getting the benefit of the bargain.

Collect evidence proving your position

Both sides need to get evidence to prove their side. This could be the contract itself or proof of a verbal agreement, receipts or bills showing expenses, letters, emails, other written communication, pictures, and witness statements. It would also include proof that you are not responsible for the breach or are only responsible for part of it, or that there was no breach of contract (or even no contract) at all.

Forms you can use for breach of contract cases

In civil cases, most of the court forms are optional. You can use the optional forms if they work for your case, or you can create your own documents, called “pleadings.” Forms can be easier to use if they are available because they help you know what to ask for.

For the plaintiff

As a plaintiff, you always need a Summons, a Complaint, and at least one cause of action.

• You must use the Summons (form SUM-100) and a Civil Case Cover Sheet (form CM-010)
• You can use Complaint—Contract (form PLD-C-001) or create your own.

There are several causes of action forms you can use if they fit your situation:

• Cause of Action—Breach of Contract (form PLD-C-001(1))
• Cause of Action—Common Counts (form PLD-C-001(2))
• Cause of Action—Fraud (form PLD-C-001(3))

For the defendant

As the defendant, you have the right to respond to the lawsuit. You must do so within 30 days of being served with the Summons and Complaint. There are several options for how to respond so make sure you read “ Decide what to do if you are sued ” to learn more.

• To answer the lawsuit (which is one of your options to respond), you can use Answer—Contract (form PLD-C-010) or create your own. You may also be able to use a form called a General Denial (form PLD-050). Read the instructions on that form very carefully to make sure you can use it in your case.
• In an answer, you tell the court which parts of the plaintiff’s claim are true and which are not.
• You can also bring up affirmative defenses. These are legal defenses which give you a good reason for not being held responsible for breaking the contract, either as a full defense or partial.

Check out the guide from the Sacramento County Law Library on Answering a breach of contract lawsuit. Most of the information is true for every county in California.

Things you may want to talk to a lawyer about

Any side can benefit from consulting a lawyer. But, there are times when it is particularly important to get advice from a lawyer. For example:

The contract has a binding arbitration clause. This means that the contract says you must go to arbitration and whatever is decided in arbitration is final.

There are major losses or they are very hard to figure out. If the money lost due to the breach of contract is very high or the losses are hard to calculate, it may be worth paying a lawyer to either make sure you pursue your case correctly or to defend you from a case that could end up costing you a lot of money.

It's not clear who is at fault. A lawyer can help in cases where is confusion as to who really is at fault or there are several people who could be at fault. Or if you are or could be partially at fault.

The case is old. Determining the legal time limit (statute of limitations) for a case can be tricky, and calculating when it started to run can be difficult. And there are things that may extend the time to file a case. Talk to a lawyer if you think your case is old.