Business Law & Commercial Litigation
By the Business Attorneys at Garg & Associates, PC, serving The Woodlands, Spring, Houston, Conroe, Humble, Kingwood, Tomball, Cypress, Huntsville, Westchase, Southwest, Sugar Land, West Oaks, Alief, Memorial, River Oaks, Stafford, Katy, and Missouri City.

Breach of Contract

Often times, people are confused between an agreement versus a contract.  An agreement, verbal or reduced to writing, may or may not be a contract.  An agreement, however, may not be enforceable because it does not meet all the essential requirements.  A contract is a legally enforceable agreement between two or more parties.  In determining whether the there is a breach of contract, the experienced contract attorneys at Garg & Associates will analyze the legal issues and determined whether a contract exists.  If the agreement cannot be construed as a contract, the Garg & Associates’s commercial litigation attorneys will determine whether there is any other remedies, such as a quasi contract.  Before going into issues of Breach of Contract, you need to know the elements that would make an agreement an enforceable contract.

An enforceable contract must have an offer and an acceptance. An offer is manifestation of a party’s intent to enter into a contract and the acceptance of the other party would bind the parties and terms stated in the offer.  An offer can be terminated anytime prior to an acceptance unless the offer is for an option contract, a firm offer, the other party reasonably relied and acted upon the offer (promissory estoppel), or if the other party partially performed based on the offer.  For a more detailed description, please refer to the Business Contract article. 

The offer must be accepted by the receiving party within the time stated in the offer or within a reasonable amount of time is the offer stated that time is of essence.  It is important to remember that a counter offer is NOT an offer but is considered to be a rejection of the original offer and a new offer presented.  An offer may be accepted verbally, reduced in writing in the form of a signature, or through actions.  Even if a party does not express its acceptance of an offer, the party’s actions may be construed as an acceptance.  Take the examples below for instance.

• Mr. A. made Mr. B. an offer for a $10,000 loan as down payment for a car.  Although the parties did not reduce the agreement to writing, Mr. A. gave Mr. B. a check in the amount of $10,000, following by an electronic mail (email) to Mr. B, stating that “Based on our agreement, you are to repay the interest free loan of $10,000 in equal installment for the next 12 months at $833.33, starting on May 1, 2008.”  Mr. B. accepted the email but did not reply to Mr. A.  Further Mr. B. cashed the $10,000.  After the first payment in May of 2008, Mr. B. stopped payment and refused to make further payments to Mr. A.  Mr. B’s acceptance of the check, non-responsive to Mr. A’s email, and making the first payment is sufficient to show that there is a contract-in-fact.  That is, even though Mr. B. did not verbally agreed to Mr. A’s offer and did not reply to Mr. A’s email, Mr. accepted the offer based on his actions.
• Company A. is a distributor of imported widgets.  Company B. own a group of retail businesses in which it sells widgets.  On January 1, 2008, Company B. called and made an order to Company A. for 1000 widgets, with serial no. 123.  Five business days later, Company A. delivered to Company B. 1000 widgets serial no. 123 - Model 2.  Company B. accepted the offer.  After 30 days, Company A. mailed an invoice to Company B. requesting payments.  After 3 months, Company A. drafted a letter demanding payments for its shipments.  At which time, Company B. already sold 300 widgets, serial no. 123 – Model 2 but was not able to sell the same widgets.  However, Company B. sent Company A. a letter stating that the shipment was not in accordance of the order and thus would like to return the remaining 700 widgets.  Company A. refused the returned items.  In this case, because Company B. failed to return the shipment in a reasonable amount of time and had also sold a substantial amount of the widgets, under the UCC, there is an implied contract. 

Sometimes, even a valid contract may not be enforceable.  That is, the contract has a valid offer, with essential terms, and said offer was accepted in a timely manner.  However, a contract may not be enforceable if it is illegal, the party consenting does not have the authority, the contract is within the statute of fraud, the terms of the contract may be too ambiguous and susceptible to more than one reasonable interpretation, or that the contract was a mistake.  If the court finds that the contract is susceptible to any of the above, it may declare that the valid contract is unenforceable.  However, the damaged party may be able to obtain its out-of-pocket costs because of reasonable reliance or because of equity under the theory of quasi contract.

The experienced Woodlands contract attorneys and the Houston business lawyers at Garg & Associates would be able to assist you in identifying the essential issues and analyze the agreement.  Our Houston contract attorneys will scrutinize the facts and other evidence to determine whether a party has breached the contract.  The Woodlands business attorneys will determine,

• Whether an offer exists or is it simply an expression of the one’s interest to negotiate? 
• Whether the offer was accepted? 
• Whether the person who accepted the offer has legal authority, making the contract enforceable?
• What are the “considerations” for both parties?  A valid contract must have considerations.  Without which, the offer may not be sufficient to make the contract enforceable.
• Whether the terms of the contract violate any statute or that it is against public interest to enforce such agreement, such as whether the terms of the interest violate usury law (loan sharking)? 
• Whether the contract is within the Statute of Fraud? Certain contracts are not enforceable if it violates the Statute of Fraud.  A contract for real property, has any possibility not be completed in more than 1 year, for $500 or more must be in writing.
• Whether the breach is within the statute of limitation.  A statute of limitation allows a injured party to file suit within a reasonable amount of time, depending on the type of contract.
• If a contract exists, whether such contract is enforceability. A contract may not be enforceable if the terms too broad, are indefinite, unconscionable, or ambiguous where by there are multiple reasonable interpretation of such language.
• Whether each party fully performed its obligations.  Who breached or anticipatory breached the contract? A bilateral contract requires performance from both party.  A unilateral contract requires only 1 party to fully perform.  Partial performance of the contract does not make the contract revocable but the offeror must allow the other party a reasonable amount of time to complete its performance.  An example of a unilateral contract is an offer from a home-owner for a company to landscape his/her property. 
• If you are considering of signing the contract, our business and commercial litigation attorneys would assist you to determine whether the terms are too restrictive? How would any such terms affect your business or your ability to continuing working in that industry or geography.  This issue often comes up in a purchase/sale agreement or a commercial contract in terms of a “noncompete clause.” Another issue to consider is whether the terms are within industry standard and are not oppressive?

As illustrated, there are numerous issues that could arise to make the agreement an unenforceable contract.  In addition, even if the contract is not enforceable, the experienced Woodlands business contract attorneys may be able to assist you in minimizing your damages or file suit under the quasi contract theory.  It is also that breaching a contract is sometimes the price of doing business.  In anticipatory breaching a contract, you should always weigh your options under the cost/benefits analysis and determine your best option.  In these situations, the Garg & Associates’s contract lawyers would be able to assist you in negotiating an amiable settlement to further cut your losses.