Contracts govern many aspects of daily life, making breach of contract one of the most common civil causes of action. Contracts can be written or unwritten although some kinds of contracts must be in writing. Proving the existence of a valid contract is an essential part of a breach of contract claim and for obvious reasons, proving the existence of a contract is typically much easier when it is in writing. Whether in writing or not, a contract requires two or more parties who have agreed to obligate themselves to one another. One common example is where one party has agreed to provide some service and the other party has agreed to pay for that service, however there are nearly limitless types of obligations that can form the basis of a contract. The parties to a contract must be competent for a contract to be valid.
Beyond establishing that a valid contract exists, a party bringing a claim for breach of contract must show that they substantially performed their duties under the contract or that they were justified in not performing their duties under the contract. Justifiable reasons for not performing can include situations where the other party has made performance impractical or impossible.
In addition to performing their own duties under the contract, the party bringing the lawsuit for breach of contact must also show that the other party failed to perform their duties under the contract. This is the most intuitive part of a breach of contract claim. A simple example is an installment sales contract where one party delivers a product to the other party, and the party receiving the product agrees to pay for the product over time in a series of installments. The party that has delivered the product has performed their duties under the contract and if the other party fails to make their payments, they are likely in breach of the contract.
The final element of a breach of contract claim is that a party’s failure to perform under the contract results in damages to the other party. In the previous example of an installment sales contract, the damage caused by the breach is likely measured by how much is owed and remains unpaid during the contract. It is important to note that many contracts also include provisions that will hold the breaching party liable for the attorney fees and court costs of the party bringing the breach of contract claim (assuming they win their case), as well as costs of attempting to collect the amounts owed leading up to, through, and after a successful lawsuit for breach of contract..
A party accused of breach of contract can attack any of the elements of the claim, but they may also raise various other defenses to the claim. One important defense is asserting that the plaintiff has failed to mitigate their damages. When two parties have a contract together and one party breaches the contract, the other party has a duty to take reasonable steps to limit their exposure to additional damage. A familiar example of this duty is in the context of a rental or lease contract for an apartment. Where a party breaches a lease agreement by moving out before the contract is over, for example, the landlord has a duty to try to get someone else into the apartment and paying rent for that unit. The landlord typically cannot simply do nothing and claim unpaid rent for the entire duration of the contract. It is important to note that when raising this defense, the burden is on the breaching party to show that the party bringing the breach of contract claim failed to use reasonable efforts to mitigate their damages.
Another common defense to a breach of contract claim is the failure of the party alleging the breach to perform their duties under the contract. While fairly simple in theory, this defense can be complicated in practice because often both parties breach the contract at different time, in different manners and for different reasons. The interplay of those factors can be very important to the determination of which party is in the right and which party is in the wrong under a contract.
Even where all the elements of a breach of contract claim are met and none of the defenses are successful, Colorado law limits the time within which a party can bring a lawsuit for breach of contract. Generally breach of contract claims must be brought within three years of the discovery of the breach but there are some important exceptions to this general rule. Some of the most common breach of contract claims, including actions to recover a debt under a contract, actions for back rent and actions for bounced checks all must be brought within six years.
Please note that this is a simplified and generalized discussion of breach of contract claims and there are a number of important exceptions, caveats and defenses that have not been included. If you find yourself in danger of being sued for breach of contract, have already been sued for breach of contract, or want to explore how you may recover for someone else’s breach of contract, please contact Cohen & Cohen and set an appointment for a consultation.