Violating a Contract
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Do I Have a Valid Contract?
A contract exists if there is a valid offer, an acceptance of the offer, and an exchange of some form of consideration. An offer must be clear, definite, and unambiguous. Likewise, the acceptance of that offer must also be clear and, generally, must not change the terms of the offer. Finally, both sides must have consideration. This basically means that each side must confer a benefit upon the other or suffer a detriment (e.g. I give you $1,000 and you give me your car.)
A common misconception is that all contracts must be in writing. However, many oral contracts are valid, and if one party violates the contract by failing to perform, the court may consider that contract in "breach," leading to damages being awarded to the non-breaching party.
Can I Still Violate the Contract If It Is Valid?
Even if a contract is valid, there are certain events that will excuse a party from performing her end of the bargain. Although the validity of the contract itself is often the subject of legal disputes, there are other issues that may render a void the contract. However, the excuse must be a legal excuse recognized by the courts and contracts law has strict guidelines governing defenses to violating a contract. These include:
- The quality of the performance is below a reasonable expectation.
- Any conditions that were a prerequisite to performance were not performed.
- A person below the age of 18 or a mentally incompetent person is a party to the contract.
- The contract is illegal, such as a contract for the sale of illegal narcotics.
- A contract was induced by a threat.
- Public policy. Although the subject of the contract may be legal, it is so beyond social norms that a court is not likely to enforce it. for example, many states will not enforce a contract for surrogate parenting because it would force a birth mother to give up her child.
- A misunderstanding as to the contracts material terms. Sometimes a mistake as to the terms of a contract is also an excuse. However, this exception is complicated and often misunderstood.
- It is impossible for the contract to be performed (e.g. one party dies).
- The purpose or the value of the contract has been destroyed. This is called "frustration of purpose" and is a valid excuse to performance.
What Are the Consequences If I Violate a Contract?
If a contract is violated and there is no legal excuse, the non-breaching party may sue for monetary damages.This often depends on the type of breach. If the breach is minor, the non-breaching party must still perform their end of the contract but can still sue for the damages they suffered because of the breach. However, if the breach is "material," meaning it goes to the heart of the contract, the non-breaching party does not have to perform and can sue the other party immediately. The non-breaching party may receive the following monetary rewards:
- The profit the non-breaching party would have received (e.g. B contracts to sell C six stereos for $600. C plans to re-sell the stereos and has a buyer willing to pay $1000. B violates and must pay C $400.)
- Any out-of-pocket expenses spent in reliance on the contract (e.g. C buys $200 worth of accessories for the stereos to make them more valuable for re-sale. B will owe C $200.)
- The difference the non-breaching party will spend to find the goods from another buyer.
- Restitution for any money paid up-front by the non-breaching party or the value of any other benefit given to the breaching party.
- In rare situations, such as the sale of real estate, the court may force the breaching party to go through with the contract. This is called "specific performance," but it is usually not awarded in cases involving the violation of a contract.
Should I Seek Legal Help?
Violating a contract can lead to serious legal consequences. If you are involved in a breach of contract dispute, it is important to contact a business lawyer. Your attorney will represent your best interests and help to protect you from legal liabilities.
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Last Modified: 05-27-2014 10:54 AM PDT
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