When I consider all the claims our law firm is asked to handle, breach of contract is at the core of most of them. This is because at its essence, a business is a bundle of relationships. You have relationships between you and your customers, you and your vendors, and you and your employees. And in all these relationships there is room for miscommunication, unmet expectations and just plain bad behavior. There is ample opportunity for disappointment.
While breach of contract happens all the time, very few cases become a winning lawsuit. Long story short, it's hard to win a breach of contract lawsuit. There are things you can do before the fact that prevent breach of contract from even happening and then there are things beyond your control that need to go in your favor. So how do you win a breach of contract lawsuit? You may be sure you have an air-tight case, and you may be right, but a winning breach of contract lawsuit has four factors.
Factor #1: A Well Written Contract
Your best ally in winning a breach of contract lawsuit is a well thought out and clearly written contract signed by all parties that addresses all the relevant issues and potential outcomes. Yes folks! Whether it's a contract with an employee, supplier, or customer, get it in writing. And, preferably get your contract written by a business attorney who knows what to look out for and is a great wordsmith. Of course, if you get it in writing, you go a long way to avoiding a breach of contract lawsuit in the first place.
Factor #2: A Clear and Obvious Breach
The second thing you need to win a breach of contract lawsuit is a clear and obvious breach of that contract. It may seem obvious to you that another party has failed to live up to your agreement but keep in mind that there are four types of breach of contract and which type your claim falls under determines what kind of damages, if any, you can collect.( Click here to read more on the four types of breach of contract.)
Ideally the breach can be easily established with or without experts. For example, you need a customer who failed to pay their bill or a supplier who failed to deliver a crucial component that held up production. The most blatant type of obvious breach is when a customer flat out refuses to pay you. Another common type of obvious breach is when a former employee starts up a competing business or takes a job with a direct competitor and uses your trade secrets.
Factor #3: Substantial and Identifiable Damages
The third thing you need to win a breach of contract lawsuit is substantial damages that flow proximately and foreseeably from the breach. Essentially, this means you need to be able to show exactly what the breach of contract cost you. For example, being able to demonstrate that your factory was idled for a specific number of days and exactly what each day cost you while you waited for a part to arrive.
Even if you have a clear and obvious breach, proving your damages can be difficult. Say you hire a company to build a custom manufacturing machine and in your contract you include specifications on how it will work. Now if the final machine doesn't quite work as expected or breaks down in a year, what are you damages? How can you possibly calculate the cost in time and money?
Factor #4: A Defendant with Deep Pockets
Before you ever file a breach of contract lawsuit, you have to ask yourself, "Can I even collect if I get a breach of contract judgement?" It's impossible to collect against many people and businesses because they won't pay or don't have the money to pay even if you can get a judgment against them. Many times customer who fail to pay and vendors who fail to deliver do so because they are out of money. If you are going to collect a breach of contract judgement, you need a defendant with deep pockets.
Hopefully when the defendant loses or settles they will write a check and be done with it. But even if you know the defendant has money, not all defendants who CAN afford to pay a judgment WILL pay the judgement without being forced into collections. This presents yet another legal challenge because a collection agency is going to expect 40% of anything they collect.
Wondering if You Have a Winnable Breach of Contract Lawsuit?
If you want to know if you have a winning lawsuit, call our office today at (216) 200-7481. The attorneys at Calkins Law Firm will listen and give you honest advice on your chances of winning a breach of contract lawsuit.