A breach of contract occurs when one party to a contract fails to perform as promised in the agreement, and the other party suffers economic loss as a result. A party’s failure to perform as promised is the breach. A contract may be oral or written, and its provisions may be express or even implied.
A lawsuit begins when the party who alleges that the other party breached the contract files a complaint in the appropriate court. A complaint is a technical, legal document that essentially contains a statement of the case. The complaint must then be served, i.e., delivered in the legally appropriate manner, to the defendant, i.e., the person or business being sued. The defendant then has 30 days to file their answer to the complaint. The defendant may also file a counterclaim, which the other party must then answer. With the complaint and answer, the lawsuit is underway.
The answer to the question of where to file a complaint potentially can be more complex. Suing for breach of contract involves following the rules of civil procedure. When deciding where to file a lawsuit for the breach of a contract, the following are some of the factors that should be taken into consideration:
- Venue: Venue for a breach of contract lawsuit is located in a civil court that has the legal authority to hear the lawsuit. Venue is based on the location in which a substantial part of the events leading to the lawsuit took place. Venue can also be located in the place where the party a person is going to sue, the defendant in legal terminology, is located. A person cannot make a defendant answer a lawsuit in any location; the defendant must have some connection that justifies a court in asserting its authority over them;
- Jurisdiction: The court in which to file must have jurisdiction over the subject matter, i.e., breach of contract, the amount in controversy and the parties;
- Forum Selection Clause: The contract itself may identify the court in which a lawsuit concerning the contract should be brought. In addition, the contract may provide the state or even nation whose laws should apply to the resolution of the dispute;
- Statute of Limitations: The statute of limitations refers to the period of time after the breach of a contract within which an action for the breach must be brought. Every state has its own statute of limitations for breach of contract cases. For example, in Massachusetts and Connecticut, a party has six years after a breach to file a claim for breach of contract. In any event, a person who wants to sue for breach of contract must bring their action within the statute of limitations;
- Mediation: Sometimes a contract provides that the parties should not file lawsuits in a court in the event of a breach, but should use a so-called alternative dispute resolution method to resolve their issues. For example, mediation might be required by the contract. In a mediation, both parties agree on a neutral mediator who helps the parties arrive at a resolution that is mutually agreeable to them;
- Arbitration: Arbitration refers to the process in which the parties to a dispute agree to select an arbitrator to settle a dispute. An arbitrator is an independent person who hears both sides and renders a decision that is final, unless the parties agree otherwise.
Where Can I File a Breach of Contract Lawsuit?
A person may file a claim for breach of contract in any court where there is proper venue, jurisdiction for contract disputes and for the amount in controversy, unless the contract states where the claim should be filed. It is possible that a provision in a contract specifying where claims for breach should be filed would be found to be unenforceable. This is an issue that both parties would want to analyze.
Generally, a civil court of general jurisdiction would have jurisdiction over a lawsuit alleging breach of contract. Although a person might be able to file a lawsuit in a number of different courts, the laws of certain jurisdictions may be more advantageous than another. Therefore, knowing where the law allows a party to file the lawsuit and whether one jurisdiction would be better than another for some reason could make a difference in the outcome of the case.
A person may file a lawsuit in a court which has the following connection to a lawsuit:
- The state in which the defendant lives;
- Any state in which the court has some legal basis for exercising authority over the defendant, e.g. the defendant is engaged in business in the state;
- The state in which the contract was negotiated or signed;
- A federal court if the breach of contract lawsuit is based on an issue of federal law;
- A federal court if parties to the contract are citizens of different states and the amount in controversy is likely to exceed $75,000. In the case of a business, its residence is its principal place of business; and/or
- Any state or federal court in which the parties consent to be sued.
In addition to the issue of jurisdiction over the parties and the controversy, a person must file a breach of contract lawsuit in a court that has jurisdiction over the amount in controversy. The amount in controversy is the dollar value of the amount of damages at issue in the case.
Every state has its own amount in controversy requirements for the courts of the state. Most states have several different levels of trial courts, each with its own amount-in-controversy requirements. In the state of Virginia, for example, the Virginia General District Court, the lowest level of court, has jurisdiction over civil cases where the amount in controversy is $4,500 or less. So, if the amount in controversy is $4500 or less, a person must file their lawsuit in a Virginia General District Court.
If the amount in controversy is more than $4500 and up to $25,000, then either the Virginia General District Court or the Virginia Circuit Court has jurisdiction. Where the amount in controversy is more than $25,000, then the Virginia Circuit Court only has jurisdiction..
A few states, such as California, have decided to unify all trial courts so that judges and support staff can be more easily reassigned where they are needed. In California, an individual person who wants to file a lawsuit for $10,000 or less may file their case in either a small claims court or a limited civil court. A business may file in small claims court only if the amount in controversy is $5,000 or less. Amount over $10,00 ($5,000 in the case of a business) but less than $25,000 may file in a limited civil court.
In California, if the amount in controversy is over $25,000, the case should be filed in a civil court of general jurisdiction, or an unlimited civil court, i.e. a California Superior Court.
The level of the court in which a person should file depends on the hierarchy of courts in the state in which the person brings their lawsuit and the courts’ rules regarding amount in controversy. A person needs to analyze the amount they seek to recover in their lawsuit as well as other pros and cons of filing in different courts, if they have a choice.
What Are Some Possible Defenses to a Breach of Contract Claim?
If a party is sued for breach of contract, a wide variety of defenses are available under breach of contract laws. Some of the defenses that are used most often are listed below.
- Statute of Frauds: The Statute of Frauds requires that certain agreements be in writing if they are to be enforceable in a court of law. For example, all contracts for the sale of land must be in writing and signed by both parties. If a person files a breach of contract lawsuit, the defendant may assert that the contract was required by law to be in writing and signed by the defendant. If it was not, then a court may not enforce it;
- Elements of a Contract: A defendant may claim that there is no contract because the person suing for breach has not proven all the elements of a contract. A person who wants to enforce a contract must prove all of the elements of a valid contract as follows:
- Offer: One of the parties to a contract must have made a valid offer. For an offer to be valid, it must have been communicated to the other party. In addition, the offer must be sufficiently definite in its terms, including such items as quantity, if goods are involved, price, quality, and the place and time of delivery;
- Acceptance: The other party must communicate their acceptance of the offer or communicate a valid counteroffer;
- Consideration: For a valid contract to be formed, the parties must exchange consideration, or something of value. Often one party pays the other for some performance per the terms of the contract. But other forms of consideration are possible.
- Performance: The person seeking to enforce the contract must prove that they performed their obligation under the contract and that the other party failed to perform as they promised;
- Economic Loss: The party suing for breach of contract must prove that they suffered a measurable economic loss. Basically the two most commonly applied measures of damages are: 1. the loss in the value of the other party’s performance caused by the other party’s failure to perform; 2. any other loss, such as incidental losses or losses incurred as a consequence of the breach.
If all of the elements of a claim for breach of contract are not proven, then the lawsuit would not succeed.
- Unconscionable contract: a defendant may also claim that the contract terms were unconscionable. An unconscionable contract is one whose terms are so unequal as to be against public policy. If one party has more power in the deal and uses that power to make the terms of the contract obviously unfair to the other, then the defendant may assert that the contract is invalid.
Should I Get a Lawyer If I Want to File a Breach of Contract Lawsuit?
Determining where, when and how to file a claim for breach of contract can be a challenging aspect of civil law. As can be seen from the discussion above, there are a number of factors to consider when deciding how and where to file a breach of contract case.
In some cases, it is obvious which court is the right court, but in others it can require real analysis. You would be well advised to consult an experienced contract lawyers. An experienced contract lawyers can help you assess your case and determine the most favorable court in which to file. Your attorney will know the technicalities of preparing the legal documentation needed to start a lawsuit and answer any other questions you may have.