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Contract Litigation

Fairfax Injury Lawyer Brien Roche Addresses Contract Litigation

Brien Roche

A contract is an agreement between two or more people for consideration.  Consideration is the tit-for-tat.  It is the quid pro quo.  In a more common sense way, it is simply the meat of the bargain.

Meeting of the Minds

A contract or an agreement means that there has been some meeting of the minds.  That is, the parties must have come together and agreed on the basic terms of the deal.

A contract may be in writing or it may be oral.  Some contracts are not enforceable unless they are in writing.  Those contracts are governed by what is called the statute of frauds.  That statute of frauds is a Virginia statute.  It requires that for certain types of contracts there must be a writing that is signed by the party to be charged.  Without that document the contract is not enforceable.  That doesn’t mean that there is not a contract.  It simply means that one party cannot enforce it against the other.  The statute of frauds is a very complex statute that requires writings in a number of different instances.

There are a number of issues that occur in the course of contract litigation.

Writing Expected

Where the parties have been negotiating a contract and it is expected that the deal be reduced to writing then a writing may be required.  In some cases the parties may have negotiated back and forth, exchanged writings but didn’t sign anything.  If it is indeed apparent from the course of conduct that they intended to sign something then there probably is no contract.

Counteroffer

Sometimes in the course of negotiations there are counteroffers made.  A counteroffer is simply one that is in response to the prior offer.  A counteroffer is a rejection.  Once the counteroffer is made it means that at that point there is no contract.  There may eventually be a contract if either the counteroffer is accepted or the prior offer is accepted.

Adequacy of Consideration

As part of any contract there has to be consideration.  The consideration is the “meat” of the deal.  It may be an exchange of money.  It may be an exchange of property.  Consideration can come in many forms.  The consideration simply must have some value.  It may be very slight value.  If it has some value then it probably is going to be adequate.

Mutuality

As part of any contract there has to be mutuality.  What that means is that both parties are bound.  Where both parties are not bound then that means that neither party is bound.  If neither party is bound, there is no contract.  If one party can simply walk away from the deal without being responsible for contract damages, then there is no mutuality.

Intent

A basic element of a contract is the intent of the parties.  The court when interpreting the contract is always going to look for the intent.  The court is always going to try to pursue that intent.  The intent of the parties may be seen in terms of what is written, what is said or what is done.

Express or Implied

Contracts may be either express or implied.  An express contract may be either written or oral.  It simply means that the terms are stated by the parties.  A contract is implied from the circumstances in the conduct of the parties.  Typically a course of conduct cannot be used to prove an express contract.  It may however give meaning to the terms of the express contract.  With an implied contract it is the parties’ course of conduct that establishes what the terms of the contract are.

Ambiguity

Frequently in a contract there may be ambiguous terms.  If one party drafted the contract, then any ambiguous terms are going to be construed against that party.  In most contracts there is a clause that says that both parties drafted the contract.

Custom and Usage

Sometimes to determine what a contract term means, the court may look to custom and usage in the trade.  What that means is that the court looks at what is ordinarily done in that particular industry.  The custom must be well-established.  It must be known to the parties.  In addition it must be generally followed in the trade.

One of them is whether or not a signed contract was expected by the parties.  Where parties intend to reduce their agreement to writing, then many courts are inclined not to enforce any deal if there is no such writing.  Moorman v. Blackstock, Inc., 276 Va. 64, 76 (2008)

Modifying the Deal

Another frequent issue in regards to contract litigation is what it takes to modify a contract that is in writing.  Most contracts that are prepared by an attorney have a clause that deals with this issue.  In most cases that clause requires that any change to the contract be in writing and signed by the parties just as was the first contract.  In spite of that clause, a contract may still be changed in a way other than what is dictated in the contract itself.  That is, a written contract may be changed by a new oral contract. However a change to the contract must be shown by clear and convincing evidence.  Stanley’s Cafeteria, Inc. v. Abramson, 226 Va. 68, 73 (1983). Call, or contact us for a free consult.

Material Breach

A breach of contract can be material or non-material. A material breach goes to the heart of the deal. Failure to pay when payment is what the deal is all about is a material breach. A failure to deliver on time when time is of the essence is a material breach. A failure to deliver on time when there is no time of the essence clause may not be a material breach. Where the breach is material the non-breaching party may cancel the contract and claim damages. In that case if the party continues with the contract then the right to cancel may be waived. For a non-material breach there is no right to cancel but there may be a right to contract damages.

First Breach

Another frequent issue that arises in contract litigation is who breached the contract first.  In Virginia the first party to breach cannot enforce the contract.  Countryside Orthopaedics, PC v. Peyton, 261 Va. 142 (2001).  That breach however must be what is called a “material breach”.  That is, it must go to the heart of the deal.  Horton v. Horton, 254 Va. 111, 115 (1997)

Defenses

There are a number of defenses that may be raised in a breach of contract action.  One of them is impossibility.  A party may not have to perform the contract if it is impossible to do so.  The party must not only prove that it is impossible but further has to show that he did not cause it to be impossible.  In addition that party must prove it was not reasonably foreseeable when the contract was entered into that it would be impossible to perform.  If those terms are met, then that may be a bona fide defense.

Other Defenses

Another defense is what is called undue influence.  This arises when one person has overcome the free will of another and induces that person to do what he otherwise would not have done.  Undue influence has to be proven by clear and convincing evidence.

Duress is another defense.  It is a wrongful act or threat by a person that overcomes the free will of another and induces him to do what he otherwise would not do.    Duress also has to be proven by clear and convincing evidence.

Fraud in the inducement is a defense.  This is further addressed in the blog post on fraud.

Damages

In determining contract damages, those damages are fixed as of the date of the breach.  United Virginia Bank v. Ford, 215 Va. 373, 375 (1974).  Changes in value that occur after the breach are probably not relevant.

Direct or Indirect

The damages for a breach of contract are either direct damages or indirect damages.  Direct damages are those damages that are set forth in the contract.  The indirect damages may be damages expected by the parties at the time the contract was entered into.  These types of damages are not spelled out in the contract itself.  If you know that a delivery has to be made by a certain date, otherwise something bad is going to happen to me, then you know that’s an important term.  That is a term that goes to the heart of the deal.  It may not be stated in the contract. However there is no dispute that you were aware of that.  If you then fail to deliver on time and the “bad thing” happens to me, you may be liable for that bad thing.

The contract may expressly state the measure of damages.  Sometimes however it does not state that.  In regards to a sale transaction where it is expected that something will be sold and in fact there has been a breach, then the contract damages are the difference between the contract price and the price that the other party had to pay for the item at a later date because of the breach.  Definite Contract Building and Loan Assn. v. Tumin, 158 Va. 771, 784 (1932)

Liquidated

In some contracts there are liquidated damages.  Liquidated damages are those damages that are spelled out in the contract.  The parties may agree on liquidated damages because of the possibility of a breach.  They agree to fix what the amount is to be paid to the injured party in the event of a breach.

Duty to Mitigate

In any case, contract or tort, the plaintiff has a duty to minimize damages.  The plaintiff must act in a reasonable fashion to minimize.  If as a result they are greater than if he had acted to minimize then he cannot recover the amount by which they were increased.  The duty to minimize begins when the plaintiff knew or should have known of the breach.  The burden is on the defendant to prove a failure to mitigate.  The defendant has to prove the amount by which they are increased as a result of the failure to mitigate.

Quantum Meruit

A type of contract claim that sometimes arises is what is called quantum meruit.  A quantum meruit claim is a type of implied contract claim.  The defendant in this case is ordered to pay the reasonable value of the services.  In coming up with that reasonable value, the judge or jury may consider the nature of the work and the normal rate of pay.  The plaintiff has to prove the reasonable value of the services.  If a lawyer performs a service for the client and there is no express contract, then the duty to pay may be implied.  The issue then becomes the actual value of those services.

Enforcing the Contract

In some cases a party may wish to enforce the contract.  This would be through an action for specific performance.  Specific performance may be allowed in cases where the object of the contract is unique.  For instance real estate is unique.  If the seller defaults in selling a piece of real estate to the buyer, then the buyer may request specific performance.  The buyer in that case must show that he was ready, willing and able to perform. Call, or contact us for a free consult.

Factors to Look At

In reviewing a contract there are a number of things that need to be looked at:

Status

  • Have the parties been properly identified?
  • Do the entities actually exist as legal entities and did they so exist on the date of the contract?
  • If property is the subject of the contract, then the property needs to be fully described so there is no doubt as to what it is.
  • Do the parties have the full authority to enter into the contract?  If one of the parties is an entity then it must be clear that the person signing has that authority to sign and to commit the entity.
  • Is the signature format clear?  That is, if one of the parties is an entity, then it must be clear that the entity is the only one entering into the contract and below the signature line for that entity the person signing and their authority must be stated.

Conditions

  • If there is a deposit to be paid then the contract must state when it is due, the amount that is due and how it will be held.
  • Where there is to be an escrow amount held either pending the sale or pending some other event then the agent must be defined and the amount of the escrow must be defined.  If there is some security to enforce the contract then that likewise must be defined and exactly how it will attach to the property that is the subject of the deal.  That security may come in the form of a mortgage, deed of trust or a UCC financing statement.
  • Is there a feasibility or study period that is allowed before the contract becomes non-contingent?
  • Are there any other contingencies in the contract before it becomes a non-contingent contract?
  • When was the contract fully ratified?  That is, when were all of the offers and counter-offers clearly and fully accepted?

Terms

  • If title to some piece of property, real or personal, is being conveyed then how is that title to be confirmed?
  • Is there some settlement date expected in the future?  If so, it must be clear as to the date and time of settlement and the place of settlement.
  • Is there any ambiguity in the contract as to what the damages are in the event of a breach?  If the damages are direct, they need to be stated.  If the damages are indirect, then that likewise should be spelled out so it’s clear as to what the parties expect.
  • Are there any agents of any sort involved in the transaction?  If there are, who is paying their fee?

Looking Ahead

  • Is there any risk of loss that may apply to any property that is being conveyed?  If so then it must be clearly spelled out as to when either party acquires that risk of loss.
  • Is there a “time of the essence” clause in the contract?  If time is of the essence then a breach of that time requirement is a material breach of the contract.
  • Is there an integration clause in the contract?  This is a clause that states that all that parties get is what is in writing.
  • Is the contract assignable?  That is, can the rights or obligations be assigned to another party?

Notice

  • If there are notices required, then it must be clearly spelled out as to who is to receive the notice and who is to receive any copies, how the notice is to be dispatched and the address or means of dispatch.

Unjust Enrichment-Restitution

Unjust enrichment is a claim in equity. It is not a pure contract claim. It arises where one party has profited inequitably at another’s expense. The party profiting has a legal duty to restore what he received. For instance, money paid by mistake or where there is a failure of consideration would qualify. Likewise cases of oppression, undue influence or extortion would qualify. Natural justice dictates the money or property be refunded. Belcher v Kirkwood 238 Va. 430 (1989)

Call, or contact us for a free consult. Also for more info on contracts see the Wikipedia pages.

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Contact Us For A Free Consultation

Contract Litigation

Fairfax Injury Lawyer Brien Roche Addresses Contract Litigation

Brien Roche

A contract is an agreement between two or more people for consideration.  Consideration is the tit-for-tat.  It is the quid pro quo.  In a more common sense way, it is simply the meat of the bargain.

Meeting of the Minds

A contract or an agreement means that there has been some meeting of the minds.  That is, the parties must have come together and agreed on the basic terms of the deal.

A contract may be in writing or it may be oral.  Some contracts are not enforceable unless they are in writing.  Those contracts are governed by what is called the statute of frauds.  That statute of frauds is a Virginia statute.  It requires that for certain types of contracts there must be a writing that is signed by the party to be charged.  Without that document the contract is not enforceable.  That doesn’t mean that there is not a contract.  It simply means that one party cannot enforce it against the other.  The statute of frauds is a very complex statute that requires writings in a number of different instances.

There are a number of issues that occur in the course of contract litigation.

Writing Expected

Where the parties have been negotiating a contract and it is expected that the deal be reduced to writing then a writing may be required.  In some cases the parties may have negotiated back and forth, exchanged writings but didn’t sign anything.  If it is indeed apparent from the course of conduct that they intended to sign something then there probably is no contract.

Counteroffer

Sometimes in the course of negotiations there are counteroffers made.  A counteroffer is simply one that is in response to the prior offer.  A counteroffer is a rejection.  Once the counteroffer is made it means that at that point there is no contract.  There may eventually be a contract if either the counteroffer is accepted or the prior offer is accepted.

Adequacy of Consideration

As part of any contract there has to be consideration.  The consideration is the “meat” of the deal.  It may be an exchange of money.  It may be an exchange of property.  Consideration can come in many forms.  The consideration simply must have some value.  It may be very slight value.  If it has some value then it probably is going to be adequate.

Mutuality

As part of any contract there has to be mutuality.  What that means is that both parties are bound.  Where both parties are not bound then that means that neither party is bound.  If neither party is bound, there is no contract.  If one party can simply walk away from the deal without being responsible for contract damages, then there is no mutuality.

Intent

A basic element of a contract is the intent of the parties.  The court when interpreting the contract is always going to look for the intent.  The court is always going to try to pursue that intent.  The intent of the parties may be seen in terms of what is written, what is said or what is done.

Express or Implied

Contracts may be either express or implied.  An express contract may be either written or oral.  It simply means that the terms are stated by the parties.  A contract is implied from the circumstances in the conduct of the parties.  Typically a course of conduct cannot be used to prove an express contract.  It may however give meaning to the terms of the express contract.  With an implied contract it is the parties’ course of conduct that establishes what the terms of the contract are.

Ambiguity

Frequently in a contract there may be ambiguous terms.  If one party drafted the contract, then any ambiguous terms are going to be construed against that party.  In most contracts there is a clause that says that both parties drafted the contract.

Custom and Usage

Sometimes to determine what a contract term means, the court may look to custom and usage in the trade.  What that means is that the court looks at what is ordinarily done in that particular industry.  The custom must be well-established.  It must be known to the parties.  In addition it must be generally followed in the trade.

One of them is whether or not a signed contract was expected by the parties.  Where parties intend to reduce their agreement to writing, then many courts are inclined not to enforce any deal if there is no such writing.  Moorman v. Blackstock, Inc., 276 Va. 64, 76 (2008)

Modifying the Deal

Another frequent issue in regards to contract litigation is what it takes to modify a contract that is in writing.  Most contracts that are prepared by an attorney have a clause that deals with this issue.  In most cases that clause requires that any change to the contract be in writing and signed by the parties just as was the first contract.  In spite of that clause, a contract may still be changed in a way other than what is dictated in the contract itself.  That is, a written contract may be changed by a new oral contract. However a change to the contract must be shown by clear and convincing evidence.  Stanley’s Cafeteria, Inc. v. Abramson, 226 Va. 68, 73 (1983). Call, or contact us for a free consult.

Material Breach

A breach of contract can be material or non-material. A material breach goes to the heart of the deal. Failure to pay when payment is what the deal is all about is a material breach. A failure to deliver on time when time is of the essence is a material breach. A failure to deliver on time when there is no time of the essence clause may not be a material breach. Where the breach is material the non-breaching party may cancel the contract and claim damages. In that case if the party continues with the contract then the right to cancel may be waived. For a non-material breach there is no right to cancel but there may be a right to contract damages.

First Breach

Another frequent issue that arises in contract litigation is who breached the contract first.  In Virginia the first party to breach cannot enforce the contract.  Countryside Orthopaedics, PC v. Peyton, 261 Va. 142 (2001).  That breach however must be what is called a “material breach”.  That is, it must go to the heart of the deal.  Horton v. Horton, 254 Va. 111, 115 (1997)

Defenses

There are a number of defenses that may be raised in a breach of contract action.  One of them is impossibility.  A party may not have to perform the contract if it is impossible to do so.  The party must not only prove that it is impossible but further has to show that he did not cause it to be impossible.  In addition that party must prove it was not reasonably foreseeable when the contract was entered into that it would be impossible to perform.  If those terms are met, then that may be a bona fide defense.

Other Defenses

Another defense is what is called undue influence.  This arises when one person has overcome the free will of another and induces that person to do what he otherwise would not have done.  Undue influence has to be proven by clear and convincing evidence.

Duress is another defense.  It is a wrongful act or threat by a person that overcomes the free will of another and induces him to do what he otherwise would not do.    Duress also has to be proven by clear and convincing evidence.

Fraud in the inducement is a defense.  This is further addressed in the blog post on fraud.

Damages

In determining contract damages, those damages are fixed as of the date of the breach.  United Virginia Bank v. Ford, 215 Va. 373, 375 (1974).  Changes in value that occur after the breach are probably not relevant.

Direct or Indirect

The damages for a breach of contract are either direct damages or indirect damages.  Direct damages are those damages that are set forth in the contract.  The indirect damages may be damages expected by the parties at the time the contract was entered into.  These types of damages are not spelled out in the contract itself.  If you know that a delivery has to be made by a certain date, otherwise something bad is going to happen to me, then you know that’s an important term.  That is a term that goes to the heart of the deal.  It may not be stated in the contract. However there is no dispute that you were aware of that.  If you then fail to deliver on time and the “bad thing” happens to me, you may be liable for that bad thing.

The contract may expressly state the measure of damages.  Sometimes however it does not state that.  In regards to a sale transaction where it is expected that something will be sold and in fact there has been a breach, then the contract damages are the difference between the contract price and the price that the other party had to pay for the item at a later date because of the breach.  Definite Contract Building and Loan Assn. v. Tumin, 158 Va. 771, 784 (1932)

Liquidated

In some contracts there are liquidated damages.  Liquidated damages are those damages that are spelled out in the contract.  The parties may agree on liquidated damages because of the possibility of a breach.  They agree to fix what the amount is to be paid to the injured party in the event of a breach.

Duty to Mitigate

In any case, contract or tort, the plaintiff has a duty to minimize damages.  The plaintiff must act in a reasonable fashion to minimize.  If as a result they are greater than if he had acted to minimize then he cannot recover the amount by which they were increased.  The duty to minimize begins when the plaintiff knew or should have known of the breach.  The burden is on the defendant to prove a failure to mitigate.  The defendant has to prove the amount by which they are increased as a result of the failure to mitigate.

Quantum Meruit

A type of contract claim that sometimes arises is what is called quantum meruit.  A quantum meruit claim is a type of implied contract claim.  The defendant in this case is ordered to pay the reasonable value of the services.  In coming up with that reasonable value, the judge or jury may consider the nature of the work and the normal rate of pay.  The plaintiff has to prove the reasonable value of the services.  If a lawyer performs a service for the client and there is no express contract, then the duty to pay may be implied.  The issue then becomes the actual value of those services.

Enforcing the Contract

In some cases a party may wish to enforce the contract.  This would be through an action for specific performance.  Specific performance may be allowed in cases where the object of the contract is unique.  For instance real estate is unique.  If the seller defaults in selling a piece of real estate to the buyer, then the buyer may request specific performance.  The buyer in that case must show that he was ready, willing and able to perform. Call, or contact us for a free consult.

Factors to Look At

In reviewing a contract there are a number of things that need to be looked at:

Status

  • Have the parties been properly identified?
  • Do the entities actually exist as legal entities and did they so exist on the date of the contract?
  • If property is the subject of the contract, then the property needs to be fully described so there is no doubt as to what it is.
  • Do the parties have the full authority to enter into the contract?  If one of the parties is an entity then it must be clear that the person signing has that authority to sign and to commit the entity.
  • Is the signature format clear?  That is, if one of the parties is an entity, then it must be clear that the entity is the only one entering into the contract and below the signature line for that entity the person signing and their authority must be stated.

Conditions

  • If there is a deposit to be paid then the contract must state when it is due, the amount that is due and how it will be held.
  • Where there is to be an escrow amount held either pending the sale or pending some other event then the agent must be defined and the amount of the escrow must be defined.  If there is some security to enforce the contract then that likewise must be defined and exactly how it will attach to the property that is the subject of the deal.  That security may come in the form of a mortgage, deed of trust or a UCC financing statement.
  • Is there a feasibility or study period that is allowed before the contract becomes non-contingent?
  • Are there any other contingencies in the contract before it becomes a non-contingent contract?
  • When was the contract fully ratified?  That is, when were all of the offers and counter-offers clearly and fully accepted?

Terms

  • If title to some piece of property, real or personal, is being conveyed then how is that title to be confirmed?
  • Is there some settlement date expected in the future?  If so, it must be clear as to the date and time of settlement and the place of settlement.
  • Is there any ambiguity in the contract as to what the damages are in the event of a breach?  If the damages are direct, they need to be stated.  If the damages are indirect, then that likewise should be spelled out so it’s clear as to what the parties expect.
  • Are there any agents of any sort involved in the transaction?  If there are, who is paying their fee?

Looking Ahead

  • Is there any risk of loss that may apply to any property that is being conveyed?  If so then it must be clearly spelled out as to when either party acquires that risk of loss.
  • Is there a “time of the essence” clause in the contract?  If time is of the essence then a breach of that time requirement is a material breach of the contract.
  • Is there an integration clause in the contract?  This is a clause that states that all that parties get is what is in writing.
  • Is the contract assignable?  That is, can the rights or obligations be assigned to another party?

Notice

  • If there are notices required, then it must be clearly spelled out as to who is to receive the notice and who is to receive any copies, how the notice is to be dispatched and the address or means of dispatch.

Unjust Enrichment-Restitution

Unjust enrichment is a claim in equity. It is not a pure contract claim. It arises where one party has profited inequitably at another’s expense. The party profiting has a legal duty to restore what he received. For instance, money paid by mistake or where there is a failure of consideration would qualify. Likewise cases of oppression, undue influence or extortion would qualify. Natural justice dictates the money or property be refunded. Belcher v Kirkwood 238 Va. 430 (1989)

Call, or contact us for a free consult. Also for more info on contracts see the Wikipedia pages.

Contact Us For A Free Consultation

Contact Us For A Free Consultation