Breach of Contract

Business litigation may be required when a contract is breached or when the terms of the contract are contested. Legal contracts, especially business contracts, can be extremely complex. Commercial litigation involves showing the intent and meaning behind the terms of the agreement, examining the legality and enforceability of the terms, determining which provisions, if any, have been broken, and if so, determining what damages are owed or what other possible remedies are available.

Texas Law Provides Remedies for a Breach of Contract

If the opposing party is deemed to have broken a contract, there are numerous ways a plaintiff might be made whole, with the most common remedy being a monetary payment. The main remedies for breach of contract include:

1. Monetary damages: Liquidated damages can be payable to the plaintiff either under an existing contractual provision or by court order.
2. Specific performance: A court can order the performance of a contractual obligation.
3. Recission: All obligations under the contract are rescinded and none of the parties have any legal obligations moving forward.
4. Restitution: When the non-breaching party has spent money or exhausted other resources in reliance on the other party’s contractual performance, the court can order the breaching party to pay restitution to cover those losses.

When a breach of contract occurs, our breach of contract attorneys will typically send a demand letter or other comparable document to the offending party as soon as possible. The attorney may, however, directly address the issue and what the breached party needs. Depending on the type and/or seriousness of the breach, the contract at issue may specify what actions are required and/or what remedies are available. If not, Texas law provides for many remedies for breach of contract depending on the situation, and an experienced business attorney will always recommend and pursue the best course of action.

The party, or parties, being adversely impacted by a breach of contract may pursue a number of different legal actions. A business lawyer is generally needed to seek out and obtain appropriate legal recourse. The lawyer will have to defend the contract and justify how the breach resulted in losses. If the defending party decides not to pursue the action in court, the matter can still continue through settlement discussions, which are typically led by a breach of contract attorney.

The plaintiff can obtain the remedy they are seeking due to the breach with sufficient proof and a strong contract.

An attorney will obtain the evidence necessary by reviewing the contract and its terms in-depth and through the discovery process once a lawsuit is filed. In addition, plaintiffs can recover punitive damages and attorneys’ fees in some instances of breach of contract. Punitive damages are additional sums of money a court may award as a form of retribution when a contractual violation was exceptionally flagrant and deliberate.

Defenses to Breach of Contract

A breach of contract claim accuses someone of not doing what they agreed to do. The law considers why a party failed to perform and the extent of non-performance with the following legally recognized defenses.

Impossibility of Performance

If something happens that was assumed would not happen when the agreement was made, and performance becomes impracticable, a party’s failure to perform may not be a breach. Occurrences rendering performance impracticable include:

• The death or incapacity of a person necessary for performance
• Damage to or destruction of a thing necessary for performance
• Government regulation preventing performance

Natural disasters do not generally excuse performance under a contract in Texas. Many contracts contain provisions called force majeure clauses which relieve the parties from performing under certain conditions that are outside of their control, such as fires, hurricanes, tornadoes, or floods. Absent a force majeure clause, impossibility of performance may still be a valid defense when a natural disaster has prevented a party’s performance.

Substantial Performance

A party that has substantially performed its obligations under a contract will be considered to have performed all of the essential provisions of the contract even though performance is not complete.

A response of substantial performance is a defense against a material breach claim, and if successful, means the non-breaching party is still obligated to perform under the contract. The situation arises frequently in construction contracts where a builder is trying to get paid even though there is still some work left to be done to finish the project.

Breach of Implied Duty of Good Faith and Fair Dealing

The implied duty of good faith and fair dealing is a duty imposed as a matter of law. It requires parties to a contract to act reasonably and to not interfere with the performance of the contract. Texas takes a narrow view when applying the implied duty of good faith and fair dealing and will only enforce an obligation between contracting parties where there is a special relationship.

Texas currently only recognizes two types of contracts where the duty of good faith and fair dealing is required.

Texas currently only recognizes two types of contracts where the duty of good faith and fair dealing is required and where failure to fulfill the duty can give rise to a breach of contract claim. A special relationship exists between parties in the following types of contracts:

1. Between an insurance company and an insured
2. Between an executive rights holder and non-executive mineral rights owners

The duty is imposed in the above two situations because the relative bargaining positions of the parties are not equal, and the opportunity exists for one party to unfairly use their advantage to their benefit.