Breach of Contract Lawsuit
A breach of contract can disrupt your business operations and damage your professional reputation. Our attorneys are dedicated to guiding you through your breach of contract lawsuit with clarity and compassion. Call 916-290-9400 today for a free consultation, and let Cutter Law protect your interests and hold breaching parties accountable.
When a breach of contract threatens your business or professional reputation, you need a team with extensive experience and a thorough understanding of California’s laws and industries. Our attorneys bring over 130 years of combined experience in successfully resolving complex contract disputes. As California natives, we leverage our in-depth knowledge of the state’s industries and legal landscape to develop effective strategies to help you get the best results possible. Contact us today for a free consultation.
What Is a Breach of Contract?
A breach of contract occurs when one party fails to fulfill their obligations under a valid agreement. Common breaches of contract include late deliveries, payment defaults, defective performance, breach of confidentiality, and early termination of a lease.
A breach of contract may be minor or material. A material breach of contract is a violation of the core terms of the contract substantial enough to defeat the purpose of the entire contract. For example, a software developer who agrees to deliver a custom application but delivers a product lacking the core features commits a material breach of contract. Conversely, a graphic designer who delivers artwork a few days past the deadline commits a minor breach. Material and minor breaches can cause damage to a business, and you can pursue remedies for both.
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Types of Contracts
Contracts in California are legally binding, whether written, verbal, or implied. Written contracts are the easiest to enforce because their existence and terms can be proven by simply producing a copy of the contract. The statute of frauds requires some contracts to be in writing, such as contracts to sell or lease real estate.
Verbal contracts are spoken agreements. An implied contract is an agreement that is understood based on the behavior of the parties. For example, when a customer pays for a product, there is an implied contract that the business will deliver it. You have a right to sue for breach of any type of contract, but with verbal and implied contracts, you will have the added burden of proving you had a contract if the defendant denies its existence.
Elements of a Breach of Contract Claim
You may have grounds to file a breach of contract lawsuit if all of the following elements are present:
- Existence of a valid contract
- Plaintiff’s performance or excuse for non-performance
- Defendant’s breach of contractual obligations
- Damages resulting from the breach
Existence of a Valid Contract
You must prove that a written, oral, or implied contract was in place with all of the following elements present:
- Mutual agreement — Voluntary consent by all parties to enter into a legally binding agreement
- Offer and acceptance — A proposal to enter a legally binding arrangement with an agreement to abide by its terms
- Consideration — the exchange of something of value
- Legal capacity of all parties — Age of at least 18, sound mind, and the ability to understand the nature and consequences of the contract
- Legal purpose — Subject matter and activities that are not illegal
Plaintiff's Performance or Excuse for Non-Performance
To enforce a contract against someone else, you must prove that you fulfilled your contractual obligations or had a valid reason for not doing so. You may be excused for non-performance if unforeseeable circumstances beyond your control prevented you from fulfilling your end of the contract. Such circumstances are known as force majeure and include the following:
- Impossibility or impracticability — Unforeseen events like an earthquake, wildfire, government shutdown, or supply chain disruptions
- Frustration of purpose — An unforeseen event that removes the purpose of the contract, such as a cancellation
- Legal barriers — New laws prohibiting the performance of the contract
You may also be excused for non-performance if the defendant’s default, fraud, or other non-performance interferes with your ability to meet your obligations.
Defendant’s Failure To Perform
The central fact you are trying to prove in a breach of contract case is that the defendant violated the terms of the contract. This could include defaulted payments, failure to perform services, failure to meet product standards, breach of confidentiality, violation of partnership terms, and any other obligation under the contract. You have a right to sue for a material or minor breach of contract when the breach causes harm to you or your business.
Resulting Damages
To sue for breach of contract, you must prove that the breach caused you or your business measurable harm, such as the following:
- Decreased sales or revenue
- Unexpected expenses
- Loss of future sales
- Damage to your reputation
- Disruption of your business operations
- Legal or regulatory penalties
- Damage to business relationships
- Difficulty securing financing
- A lowered business credit rating
You may be entitled to liquidated damages without proof of harm if the contract specifies that you are entitled to them in the event of a breach.
Common Types of Breach of Contract Disputes
Contract disputes take multiple forms. Knowing the common types of breach of contract disputes can help you take appropriate action as early as possible to protect your interests.
Vendor and Supplier Contract Breaches
Vendor and supplier contract breaches often involve a failure to deliver products or services that meet the standards specified in the contract or to deliver them within the correct time frame. For example, a software vendor who provides incompatible or insecure software to a tech startup may be liable for data leaks, loss of sales, and loss of reputation for breaching a contract.
Employment and Non-Disclosure Agreement Violations
Employment agreements typically include obligations that apply to both sides. A breach of contract may involve wrongful termination or non-payment of wages by an employer. On the employee’s end, violations of non-disclosure agreements, non-solicitation agreements, and failure to perform job duties all constitute a breach of contract.
For example, employees in the fashion industry often sign non-disclosure agreements to protect trade secrets. An employee who leaks proprietary designs, manufacturing processes, or supplier information breaches the agreement and may be liable for the resulting loss of revenue.
Post-employment non-compete agreements in California are generally void and unenforceable , according to the California Business and Professions Code.
Partnership and Shareholder Contract Disputes
A breach of partnership or shareholder agreement can cause significant disruptions to the operations and harmony of the business. For example, in California’s technology industry, a partner breaches the duty of loyalty by selling trade secrets to a competing company for personal gain. Similarly, a shareholder may breach voting or confidentiality provisions by sharing sensitive company information without approval.
Commercial Real Estate Contracts
A breach of a commercial real estate contract commonly occurs when one party fails to fulfill their obligations under a lease, such as paying rent or maintaining the property. For example, a retail tenant may fail to pay rent for several months, which can threaten the landlord’s ability to operate or refinance the property. A landlord might breach the contract by refusing to fix a leaky roof or a bad elevator. This can interfere with the tenant’s ability to keep their store open or attract customers.
Service-Based Contracts
A breach of a contract for services can cause serious disruptions to a business and its patrons. The following scenarios are examples of breaches that can cause a company significant revenue loss and damage its reputation:
- A SaaS provider experiences widespread downtimes and fails to provide the promised support, adversely affecting the client’s ability to serve its clients.
- A management consulting firm delivers an incomplete analysis and misses deadlines, causing the client to make poor strategic decisions.
- A software company uses its license beyond its authorized scope, putting a client at risk of legal trouble.
- A film production company fails to deliver an approved script on time and delays production.
- An environmental consulting firm is late in completing environmental impact assessments and puts a company at risk of civil penalties
Statute of Limitations for Breach of Contract in California
The statute of limitations sets deadlines on filing legal action in civil matters, including breach of contract. In California, the deadline for filing a lawsuit for breach of a written contract is four years after the date of the breach or after you discover or should have discovered the breach. If someone breaches a verbal contract, the statute of limitations generally gives you two years to file suit.
These time limits can vary based on the subject matter of the contract and the nature of the breach. Always allow an experienced breach of contract lawyer, such as our attorneys at Cutter Law to review your case as soon as possible to ensure you file on time. If you get the deadline wrong and file late, your case will usually be dismissed, and you will lose out on your opportunity to recover damages for the breach.
Remedies in Breach of Contract Lawsuits
The available remedies for breach of contract are meant to restore you to the position you should have been in had the breach not occurred. They include the following:
Restitution
Restitution is repayment for any value or benefit the defendant gained from the breach. For example, a tech developer who receives advanced payment for an app but fails to deliver can be required to return the payments to prevent unjust enrichment.
Specific Performance
When a court orders specific performance, it means the defendant is required to fulfill the terms of the contract as originally agreed. Suppose the seller of a historical winery changes their mind after accepting an offer, then refuses to transfer the property. A court can order the owner to complete the sale.
Expectancy Damages
Expectancy damages are compensation to cover the “benefit of the bargain,” — the value of the benefits you would have received had the breaching party fulfilled the contract. For example, suppose a set designer fails to complete the design for a film studio, forcing the studio to cancel a few performances. A court could order the design company to compensate the studio for the lost profits.
Reliance Damages
Reliance damages are compensation for the costs you incurred while relying on the contract. Their purpose is to restore you to the position you were in before signing. For example, a filmmaker contracts with a producer to finance a documentary. The filmmaker invests time and resources with the expectation that the producer will honor the contract. The producer withdraws and prevents the documentary from being completed. A court can award reliance damages to reimburse the filmmaker for these costs.
Liquidated Damages
Liquidated damages are a specific sum of money the parties in a contract agree to pay if they breach the contract. It is not necessary to prove you were harmed by the breach to receive liquidated damages. However, §1671 of the California Civil Code allows a court to invalidate liquidated damages if the amount is unreasonable.
For example, a commercial contract states that a tenant must pay $20,000 in liquidated damages if they terminate the lease early to cover the landlord’s cost to acquire a new tenant. This may be reasonable because it reflects the landlord’s costs to relet the property. However, if the contract requires $100,000 in liquidated damages, the court may find it unreasonable and refuse to award them.
Rescission and Cancellation
The court may nullify a contract when there is evidence of fraud, misrepresentation, duress, undue influence, or a mistake. When a contract is rescinded, it is retroactively voided as though it never existed. Cancellation terminates the agreement but not retroactively.
Suppose an auto shop contracts with a supplier that promises to provide certified parts compliant with California’s emission standards. The supplier sends counterfeit parts that do not meet these standards. The court could rescind the contract due to the fraudulent misrepresentation.
Attorney Fees and Costs
Section 1717(a) of the California Civil Code allows compensation for attorney fees and costs if the contract specifies that the breaching party is responsible for them. For example, suppose a construction contractor fails to complete work as agreed, and the contract includes a clause stating the prevailing party is entitled to attorney fees. The court would likely find the contractor liable for attorney fees. However, if there is no such clause, the construction company would likely be responsible for its own attorney fees.
Injunctive Relief
An injunction is a court order to cease an activity. In a contract dispute, a court may order the breaching party to stop activities that harm the non-breaching party or enrich the breaching party.
For example, a hotel management company contracts with a manager and includes a clause prohibiting the manager from poaching staff. The manager recruits the hotel’s staff on behalf of another hotel. The court could order the manager to stop recruiting because these activities hurt the hotel.
Suppose an organic farmer contracts with a distributor under a confidentiality agreement not to disclose trade secrets. The distributor shares the company’s proprietary farming methods with a competitor. The distributor receives a payment for the disclosure and seeks out other competitors to disclose to. The court could order the distributor to stop sharing the trade secrets to stop unjust enrichment.
How Breach of Contract Cases Proceed in California
The legal process for a breach of contract claim requires a careful review of the contract, an analysis of performance by both parties, and strategic navigation of the court system. Our experienced breach of contract attorneys provide litigation and pre-litigation support through every step of the process.
Case Investigation and Demand Letters
When you contact our business litigation law office, we will schedule a free consultation so we can ask questions and review your evidence. If we accept your case, we will investigate the facts, determine the value of your claim, and send a written demand for relief. The demand letter may include a request for money damages, rescission of the contract, a demand to cease the breaching activities, and any other remedy allowed by law.
The Complaint
If the breaching party fails to comply with the demand letter, we will file a breach of contract lawsuit in the appropriate Superior Court. We can file your claim in the county where the breach occurred, where any of the defendants live, or if the defendant is a business, wherever the business is headquartered. If the contract is for the sale or lease of real estate , you generally must file in the county where the property is located.
Your complaint must include a description of the breach and the damages you are seeking. You must include a summons with the complaint, which notifies the party that you are suing. Your lawsuit is only valid if the other party receives a copy of the complaint and summons. This is known as serving the lawsuit. Someone over 18 who is not a party to the lawsuit must serve the documents. This is often the sheriff or a professional process server
Answer and Pre-Trial Motions
The defendant may ignore the complaint, offer a settlement, or file an answer. A defendant could also file a counter lawsuit, a cross-motion, or a motion to dismiss. A cross motion is a request for a resolution other than the one the plaintiff requested in the complaint. You have 30 days to file a response to a cross-motion. If the defendant does not file a response, you can request a default judgment. Once the defendant files a response, the discovery phase commences.
The Discovery Phase
The discovery phase is the period during which the parties exchange evidence. It allows the parties to ascertain the strength of the other side’s case and may guide settlement negotiations. California laws allow both sides to use the following tools to obtain evidence during the discovery process:
- Depositions — sworn testimony given in informal hearings
- Interrogatories — Written questions composed by each party, which the other party must answer under oath
- Inspections of documents, things, and places — Both sides can request copies of internal documents, emails, memos, billing records, or other evidence that could shed light on the case
- Requests for admissions — legal questions one side asks the other, which the other side must admit or deny
- Exchange of expert witness information — Both sides reveal the facts their expert witnesses will testify to
If the breach of contract involves unauthorized disclosure of trade secrets , the plaintiff must specify the trade secret and include sufficient details to identify the nature of the misappropriation. This must be done before discovery begins.
Case Management Conference
If the case is complex, the judge may schedule a case management conference to assess the progress of the case. The purpose is to encourage a settlement, determine whether the case is ready for trial, identify issues with discovery, and decide whether alternative dispute resolution is appropriate. During the conference, the judge will ask both sides if they want a jury trial and set the date. Each court has its own procedures for handling case management conferences.
Settlement Negotiations and Alternative Dispute Resolution
Settlement negotiations often begin before the lawsuit is filed. The discovery process gives each side insight into the strength of the case and can motivate one party to settle, even if they were unwilling before.
Trials are expensive for both sides, and they can drag out a case. A judge may order alternative dispute resolution if the parties cannot settle on their own. Alternative dispute resolution may be voluntary, court-ordered, or contractually mandated. The options for alternative dispute resolution in California include the following:
- Mediation — A neutral third party meets with both sides to help them communicate so they can reach an agreement
- Arbitration — Both sides present their cases before an arbitrator, who then renders a legally-binding decision. The arbitrator’s decision is usually final with no right to appeal. Many contracts require arbitration for dispute resolution.
- Neutral Evaluation — A subject matter expert provides practical options for how a case could be settled..
- Settlement Conferences — A judge or settlement officer meets with the parties to assist with settlement negotiations, often shortly before the scheduled trial date.
Our California business litigation lawyers are skilled negotiators who leverage our local roots, track record, and experience to get you the settlement you deserve.
Trial and Post-Judgment Enforcement
A case goes to trial if the parties fail to settle, unless the contract requires arbitration. After hearing evidence from both sides, a judge or jury issues a verdict on whether a breach of contract occurred. The court then makes a final ruling known as a judgment, which affirms the verdict and awards damages and other remedies. If the defendant fails to pay damages or obey a court order, the California Code of Civil Procedure provides the following options for enforcement:
- Writ of execution — a court order for law enforcement to seize assets, such as bank accounts, wages, and property
- Liens on personal or real property — a legal interest in the property that allows you to collect on the debt if the property is transferred, sold, or liquidated
- Wage garnishment — an attachment on someone’s wages requiring an employer to withhold the wages from the employee and pay the creditor
- Sanctions and contempt of court — fines, penalties, and imprisonment for failure to follow a court order, such as an injunction or an order for specific performance
Our business litigation office will collect damages and handle the post-judgment enforcement for you so you can get back to running your business.
How To Strengthen a Breach of Contract Claim
You will need solid evidence to prove the existence of a valid contract and the elements of a breach. Your evidence must show that you performed your end of the contract to the fullest extent possible while the defendant breached theirs. Such evidence generally includes the following:
- The contract, if in writing, including all addendums and signatures
- Evidence that you had a contract if it was verbal, such as witnesses and performance
- Receipts, invoices, and delivery slips
- Emails and other correspondence
- Photographs or videos
- Time logs
- Inspection reports
- Licenses and certificates
You will also need evidence showing the harm your business suffered because of the breach. Such evidence may include profit and loss statements, cash flow statements, reduced sales data, inspection reports, return receipts, and industry reports.
Contact an attorney as soon as you suspect a breach of contract and before you confront the offender. Our knowledgeable business law attorneys can determine whether your contract is enforceable and help you evaluate whether the available remedies justify the cost of litigation and its effects on your relationship with the offenders. We can then devise the most effective strategy for negotiations and a potential trial.
Let Cutter Law Help with Your Contract Dispute
Our experienced attorneys are here to stand with you through every stage of your breach of contract lawsuit. We have office locations in Sacramento, Oakland, and Santa Rosa, and we serve all of California. We charge no upfront fees, and you pay nothing unless we win. Contact us online today or call (916) 290-9400 for a free consultation.
401 Watt Avenue Suite 100 Sacramento, CA 95864
1901 Harrison Street Suite 910 Oakland CA 94612
51 E St Santa Rosa, CA 95404
Frequently Asked Questions
Can I Sue Someone for Breaking a Verbal Contract in California?
Yes, a verbal contract is enforceable, but the agreement must meet the same requirements as a written contract to be valid, including a mutual agreement, an offer and an acceptance, consideration, legal capacity of all parties, and a legal purpose. You may be able to prove a verbal contract existed by presenting witnesses who were aware of the contract, producing written documentation that shows a contract existed, and showing that the conduct of the parties was consistent with a contract.
However, a verbal contract may not be valid if it involves real estate or has terms lasting longer than a year. The California Statute of Frauds requires these contracts to be in writing.
How Long Does a Breach of Contract Lawsuit Take?
A breach of contract lawsuit may take a few months to several years to resolve, depending on the complexity of the case, the stakes involved, and whether the case settles or goes to trial. At Cutter Law, our attorneys have local roots, so we know the lawyers, judges, and legal landscape of the cities and counties throughout the state. As business owners ourselves, we understand how much your business means to you. We are committed to helping you restore your business operations and securing the best results possible.
What Is a “Material” Breach?
A material breach is a violation of the core terms of a contract to such a degree that it defeats the purpose of the entire contract.
What Damages Can I Recover?
You may be entitled to receive money damages, injunctive relief, or specific performance in a California breach of contract lawsuit. Money damages may include restitution, expectancy damages, reliance damages, liquidated damages, and attorney’s fees, depending on the terms of your contract and the nature of the breach. The purpose of money damages in a breach of contract claim is to restore your business to the position it would have been in had the defendant performed the contract or to the position your business was in before signing it.
Can I Recover Attorney’s Fees?
In California, you can generally only recover attorney’s fees in a breach of contract claim if the contract specifies that the prevailing party is entitled to collect them.
Do I Need a Written Contract To Win?
No, you do not need a written contract to prevail in a breach of contract claim. A contract may be enforceable whether written, verbal, or implied. Without a written contract, you will have the added burden of proving the contract existed. However, the standards for evidence are otherwise the same. With the help of a knowledgeable business litigation law firm like Cutter Law, you can build a strong case and get the best result possible for breach of contract, regardless of whether it was in writing.
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