Suing for Breach of Contract: What You Need to Know Before Filing a Lawsuit

Business dealings rely on contracts. When one party doesn’t fulfill their promises, the other party might seek redress through a lawsuit. This comprehensive guide outlines what you should do first if you suspect a contract breach and how a lawyer can advance your legal interests.

Reviewing Contract Terms

A contract is a legal document that outlines the details of an agreement between businesses. When one company doesn’t uphold its side of the agreement, it can be considered a breach of contract. 

If you think your company has been wronged and are considering suing for breach of contract, the first step is to confirm that a breach has occurred. Closely review the stated obligations of each party. The conditions for these duties are important details to help assess whether either party has failed to uphold their promise.

Global Legal Law Firm has contract attorneys who understand electronic payment agreements and can make an informed assessment of the contract status. Many details of the contract are specific to the payments industry and might be unfamiliar to a general practice business attorney or corporate litigation counsel. 

As a business owner, it is essential to review the contract with an attorney who is knowledgeable about this niche area of the law before starting a lawsuit.

Gathering Evidence

A lawsuit rests on evidence that a breach of contract occurred. Evidence can include documents, financial records, video or audio recordings, or witness testimonies. This evidence serves as proof that the other side did not uphold its end of the bargain. Without evidence, the defendant can simply deny the breach, and the plaintiff has little recourse if this happens.

The defendant can also introduce evidence that they have not broken the contract. In a merchant services dispute, for example, a plaintiff might claim that the defendant withheld residuals. The plaintiff’s evidence might include financial documentation showing the lack of deposits to a specific account. In response, the defendant might have evidence that they did, in fact, pay, such as transfers to another account controlled by the defendant. 

Keep all possible evidence for a lawsuit. This includes both your company’s activities and any interactions or activities with the defendant. A judge or jury wants to see the whole picture of the events so that they can decide whose argument is best supported by the evidence.  

Determining Remedies

If the defendant loses, they have to make up for the breach. A remedy is what a plaintiff asks for at the start of a lawsuit to compensate for their losses. Often remedies involve money, but there are other options, such as ending the legal agreement between the parties.

Even if a judge or jury sides with the plaintiff, they have to decide what remedy is reasonable. A business might not get the remedy they request. They might receive less money or money instead of the performance of a specific act. An electronic payments contracts attorney can recommend an appropriate remedy given the alleged breach in question. 

A remedy in contract law typically aims to restore the plaintiff to the position they would have been in had the breach not occurred. In electronic payments litigation, the usual types of remedies are damages, specific performance, and contract termination. 

Damages

“Damages” is a legal term for compensation awarded for wrongdoing. Most breach of contract plaintiffs ask for compensatory damages. These put them back in the position they would have held if not for the breach. These are also called actual damages, as they represent the exact amount the business lost because of the defendant’s action or inaction.

A breach of contract case can include many different types of damages, including: 

• Expectancy Damages: Represents the plaintiff’s expected compensation had the contract been properly executed. 
• Reliance Damages: Represents the economic status of the plaintiff if they had not relied on the contract that the defendant breached.
• Restitution: Damages that take profits the defendant earned as a direct result of the breach.
• Liquidated Damages: Compensation that is already defined in the language of the contract. Identifying liquidated damages clauses is one reason to work with a contracts attorney, such as those at Global Legal, in the event of a breach. These lawyers can advise on the full scope of legal options when this clause is in place.
• Punitive Damages: Though rare in contract cases, punitive damages are meant to punish wrongdoers for particularly egregious actions. Punitive damages might arise in an action for tortious interference, where a third party wrongfully interferes with the contractual relationship between two parties. 

Specific Performance

Sometimes money cannot make up for the harm or losses that result from a breach. In this case, a judge might award the remedy of specific performance. With this remedy, the breaching party must perform what was required of them under the contract. If exact specific performance is impossible, a judge might order the defendant to perform the actions as closely as possible.

Let’s say an art collector had a contractual agreement to loan a piece of art to a gallery for public display between specific dates. In exchange, the gallery might agree to promote the collector’s charitable foundation. The art collector then breaches the agreement by withholding the artwork. Specific performance might order the collector to honor the contract by loaning the artwork for the same period of time on different dates. 

Electronic payments litigation can involve specific performance at any time when money cannot fully account for the plaintiff’s losses and proper actions under the contract are still possible.

Contract Termination

Sometimes, a contract breach is enough to sever the contract. This ends the obligations and benefits under the contract and might end the business relationship. 

Not every breach gives rise to termination. The breach has to be material, which means it is fundamental to the deal struck between the parties. Even in the case of a material breach, a business might want to keep the contract in place. The sides can dispute whether a breach is material and whether they wish to terminate the contract. Often, material elements are identified in the contract, so the parties do not have to rely on the discretion of a judge or jury to decide what is material.  

When a breach of contract occurs, a judge can grant damages, specific performance, contract termination, or some combination of the three within the same ruling. By working with a breach of contract attorney like those at Global Legal, a business can rationally assess whether suing the breaching party for damages alone is the right course of action or whether additional remedies are desired.

Role of a Breach of Contract Lawyer

As a business owner, working with a contracts attorney can help you to best prepare for a breach of contract lawsuit. If you decide to proceed with litigation, you have the benefit of a contract lawyer’s knowledge to advise on strategy. Attorneys work with clients through all phases of the case, from an initial assessment to a negotiated settlement or third-party judgment. 

Assessing the Strength of Your Case

At your initial meeting and as legal events unfold, a breach of contract attorney can assess the strength of your case. While there might have been a clear breach of the contract, it might not be in your best interest to pursue legal action. Perhaps the business relationship is too valuable to start an adversarial legal process. On the flip side, you might want to take action on a breach to preserve your legal rights. By filing a lawsuit, you are demonstrating that you intend to uphold the language in the agreement. 

A contracts lawyer can help you weigh these options, especially in light of the evidence. An attorney can help you decide if suing is the right course of action and whether you’re likely to win. Sometimes the remedy available is not worth protracted litigation, and a discussion with the other side about the breach and its effects can achieve better business results.

Statute of Limitations

The law only allows you a certain amount of time to file a breach of contract lawsuit. In California, the statute of limitations is two years from the date of the breach for an oral contract and four years for a written contract. While this might sound straightforward, there can be a dispute about when the clock starts. A contracts lawyer can review the events with you and help determine whether or not you still have time to file a claim. 

Navigating Potential Defenses

Even when a breach occurs, the other side might have a valid legal defense. For example, your actions might have prevented the defendant from fulfilling their obligations under the contract. If the other side has a valid defense, you might lose the lawsuit even if you suffered losses because of the breach. A contracts lawyer can help navigate these defenses as they come to light.

Suing for Breach of Contract: Working with Experienced Attorneys

Electronic payment agreements are detailed contracts that apply to a niche industry. The attorney who represents your interests in a lawsuit should regularly represent clients in this area so you can benefit from their experience and knowledge. Contact Global Legal Law Firm today to see how we can help your business.