If you are party to a contract, and the other side fails to perform their agreed upon actions, you may have a cause of action against them. This blog will discuss the potential pitfalls in litigating a contract claim.
Formation of a Contract
In New Jersey, certain requirements must be met for a contract to be valid and binding. Specifically, the parties must show the following: (1) an Offer; (2) Acceptance of the Offer; (3) Consideration; (4) Mutual Assent to be Bound; and (5) Reasonably Certain Contract Terms. See N.J. Jury Instr. Civ. 4.10C. If a contract is missing any of these specific requirements, the entire contract may be considered null without the parties being required to perform their promised obligations.
What to Know Before Filing a Complaint
As long as the contract was valid in New Jersey, the injured party likely has a claim if the other party
failed to perform their obligations. This does not mean the injured party can immediately claim victory, however. Before filing any complaint, the plaintiff must ensure they do not run afoul of any statute of limitations. In New Jersey, a breach of contract claim has a six-year statute of limitations. This means any claim a party has against a potential defendant may be forfeited if, after six years, the injured party fails to bring their claim.
Types of Breaches
While it may seem like a breach of contract should be obvious, that is not always the case. There are three specific types of breaches we will discuss: (1) material breach; (2) non-material breach; and (3) anticipatory breach.
1. Material Breach of Contract
This type of breach occurs when you the other party entirely fails to uphold their end of the bargain. For example, a painter uses the wrong type of paint when working on a house, or a vendor ships materials that are entirely different from what was ordered. Essentially, the breaching party has provided goods or services that were entirely different from what was specified in the contract. The breaching party has failed to provide exactly what was written in the agreement. This also occurs when the breaching party has failed to timely perform their obligations, or when the injured party receives less than the benefit expected.
A plaintiff suing for a material breach of a contract may receive whatever damages they suffered from the defendant’s failure to perform. The painter may be on the hook for paying for new paint and the costs to complete the job. The vendor may have to issue a refund, or ship the appropriate materials. The purpose is to put the plaintiff in the same position they would be in if the contract had been completed without issue. This includes paying for damages incurred outside of the scope of the contract, such as lost income due to the failure of the defendant.
In the case of a material breach, the plaintiff has the option to decide not to perform his or her part of the contract. The property owner may refuse to pay the painter or the business could refuse to pay the vendor. The plaintiff may, in very specific circumstances, request specific performance by the breaching party.
2. Non-Material Breach of Contract
A non-material breach occurs when only certain obligations under a contract are fulfilled. This could mean a late shipment of ordered goods, or the painter completing the job, but outside of the time frame stated in the contract.
A plaintiff suing for a non-material breach of contract may still be awarded some damages, but they will have a tougher time proving them. They will need to show some sort of loss as a result of defendant’s breach, such as loss of income.
In the case of a non-material breach, the plaintiff still needs to perform their obligation on the contract. The plaintiff can still pursue damages for issues that arose due to the non-material breach, but they must still uphold their end of the contract.
3. Anticipatory Breach of Contract
Normally, a plaintiff cannot bring a suit until it is “ripe” for adjudication. But what happens if the other party informs you in advance they will not complete the contract? That is called anticipatory breach. It means the other party knows they will not be able to perform their obligations, and the plaintiff is notified. If the painter from above tells you that they will not be able to paint your house on time, that is anticipatory breach. It can still be actionable, and a plaintiff may still be entitled to legal remedies.
However, a defendant may actual repudiate their breach, meaning they may essentially “take back” their anticipatory breach. If they do so with time to perform the contract, the contract is still binding. A potential plaintiff may request “adequate assurances” that the defendant will perform in accordance with the contract if they have reasonable grounds to believe the defendant is going to breach.
Failure of the breaching party to either repudiate or provide adequate assurance may permit the plaintiff to revoke the contract. However, the defendant’s indication of non-performance must have been definite and clear.
Defenses to Breach of Contract Claim
A defendant may have certain defenses to any breach of contract claim. The following defenses are some of the more common ones:
- Impossibility of performance
- Unconscionability
- Mutual Mistake
- Duress
- Frustration of purpose
- Fraud
This list is not all-encompassing of the possible defenses a defendant may use, but are the more
common defenses used in New Jersey. It is the plaintiff’s responsibility to ensure the contract is binding and there are no statute of limitations issues to be aware of.
If you are a plaintiff or defendant in a breach of contract case, it is important to know what your rights and defenses are. It is important to consult with an experienced attorney to help navigate your options and provide the best argument for your case.
