Breach of contract occurs when one party fails to fulfill their obligations as stipulated in an agreement. In California, specific remedies and defenses are available to address such breaches, providing recourse to the injured party. Understanding these remedies, from compensatory damages to equitable relief, is crucial for effectively navigating contract disputes.
By Brad Nakase, Attorney
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Example: Suppose a contractor agrees to remodel a kitchen, but leaves the work unfinished without a valid reason. To recover damages, the homeowner must prove the contract existed, they paid as agreed (i.e., performed), the contractor failed to fulfill their obligations, and the unfinished renovation caused additional costs. This example highlights the importance of establishing not only the breach but also showing the harm directly caused by the contractor’s actions.
The four basic elements of breach of contract are:
Example: If a supplier fails to deliver materials as agreed in a purchase contract, the buyer must demonstrate the presence of a valid contract, prove they made the required payments (performance), show the supplier’s failure to deliver (breach), and describe the financial harm they experienced due to this failure (damages). This step-by-step breakdown emphasizes that each element must be clearly proven for a breach of contract claim to succeed.
A written contract may be pleaded either by its terms—set out verbatim in the complaint or a copy of the contract attached to the complaint and incorporated therein by reference—or by its legal effect. (Heritage Pacific Financial, LLC v. Monroy, 2013).
Example: Imagine a tenant suing their landlord for failing to repair a major leak as promised in the lease. The tenant attaches a copy of the lease to the complaint, showing the clause that required timely repairs. By attaching the contract, the tenant provides direct evidence of the landlord’s obligations, thereby making their claim more robust.
In order to plead a contract by its legal effect, the plaintiff must allege the substance of its relevant terms. This is more difficult, for it requires a careful analysis of the instrument, comprehensiveness in statement, and avoidance of legal conclusions. (Ibid.).
Example: Suppose a homeowner sues a roofing company for failing to fix a leak. Instead of quoting every term of the contract, the homeowner describes that the company was obliged to fix the leak within one week of notice. This approach simplifies the complaint but requires precise wording to effectively communicate the company’s obligations under the contract.
In pleading the performance of conditions precedent in a contract, it is not necessary that the plaintiff state the facts showing such performance, but it may be stated generally that the plaintiff duly performed all the conditions on his or her part, and if such allegation be controverted, the party pleading must establish, on the trial, the facts showing such performance. (Civ. Proc. Code § 457).
Example: A supplier sues a retailer for unpaid invoices under a contract for goods delivered. The supplier can generally state that they fulfilled their obligations by delivering the goods as required, rather than detailing every step they took, simplifying the complaint until more specific proof is needed at trial.
The party against whom a complaint or cross-complaint has been filed may object, by demurrer or answer, to the pleading on grounds that “it cannot be ascertained from the pleading whether the contract is written, is oral, or is implied by conduct.” (Civ. Proc. Code § 430.10(g)).
Example: If a freelance writer files a complaint against a client for failing to pay, but fails to specify whether their agreement was in writing or verbal, the client may object by filing a demurrer. The lack of clarity in the nature of the contract makes it difficult for the defendant to understand their obligations, demonstrating why specific details are critical in pleadings.
What is a Contract? “A contract is an agreement to do or not to do a certain thing and gives rise to an obligation or legal duty that is enforceable in an action at law.” (Civ. Code § 1549).
Example: A small business hires a delivery service for a monthly rate to transport goods. The signed agreement detailing each party’s duties forms a valid contract because it establishes enforceable obligations. This highlights the importance of a clear agreement for defining the duties each party is bound to perform.
Political Candidate Agenda Not a Contract to Constituents
Political candidates cannot be held liable for breach of contract when they do not follow through on political agenda because these pledges do not contain at least two contracting parties. (Schaefer v. Williams, 1993).
Example: During an election, a mayoral candidate promises to lower taxes. When they fail to do so, voters cannot sue for breach of contract because campaign promises lack mutual obligations between two contracting parties. This illustrates the difference between political promises and enforceable contracts.
Severable Contract
A severable contract is one that is susceptible of division in two or more parts. The failure to prove breach of contract for one part of a severable contract does not bar plaintiff’s right to recovery for breach of another part of the severable contract. (Armstrong Petroleum Corp. v. Tri-Valley Oil & Gas Co., 2004).
Example: A property management company enters into a contract to manage both lawn maintenance and pool cleaning for an apartment complex. If the company fails to clean the pool, tenants can still enforce the lawn maintenance part of the contract. This example shows that severable contracts allow recovery for separate obligations even if one part is breached.
Promise to Refrain from Unlawful Conduct is Not a Valid Contract
In California, a promise to refrain from unlawful conduct is unlawful consideration. Thus, a contract that includes such a promise as consideration is illegal, and thus void. (Planned Parenthood Fedn. Of Am., Inc. v. Ctr. for Med. Progress, 2019).
Example: If a party agrees not to trespass on another’s property in exchange for payment, that promise is not valid consideration since it involves refraining from illegal conduct. This reinforces that contracts require lawful consideration to be enforceable.
Plaintiff Must Prove That He or She Fully Performed The plaintiff must prove that he has fulfilled his obligations and complied with any, and all, conditions and agreements of the contract that he is required to perform. (Brown v. Grimes, 2011).
Example: If a homeowner hires a painter and pays the agreed deposit, but the painter never starts the work, the homeowner has fully performed their obligations. This allows the homeowner to pursue remedies for breach of contract because they fulfilled their contractual duty.
Plaintiff Must Allege Excuse for Non-Performance
If plaintiff was unable to perform because the defendant prevented him from doing so, the plaintiff must allege such excuse for non-performance in the complaint. (Durell v. Sharp Healthcare, 2010).
Example: Suppose a construction company contracted to build a house is prevented from completing its work because the property owner blocks access to the construction site. In such a case, the construction company must allege in their complaint that the property owner’s actions excused their non-performance. This example highlights the importance of showing why non-performance was justified when alleging a breach.
Prevention of Performance by Other Party
Prevention of performance by one party to a contract excuses performance by the other party. (Hale v. Sharp Healthcare, 2010). This includes a party who prevents fulfillment of a condition of his own obligation under a contract.
Example: A catering service agrees to deliver food for an event, but the event organizer fails to provide access to the venue for setup. Here, the event organizer’s actions excuse the caterer from fulfilling the contract. This illustrates that one party’s interference can excuse the other party’s obligations.
Waiver of Plaintiff’s Performance by the Defendant
The defendant could waive the plaintiff’s performance under the contract or any conditions if the performance or conditions solely benefited the defendant. (County of Solano v. Vallejo Redevelopment Agency, 1999).
Example: A landlord might waive a tenant’s requirement to pay a late fee, especially if the delay in payment did not negatively affect the landlord. This example demonstrates how a party’s actions can waive certain obligations of the other party.
Performance Excused If Performing Becomes Impossible
When performance under a contract depends upon the existence of a given thing assumed as the basis of the contract, performance is excused if the thing ceases to exist or turns out to be non-existent. (Maudlin v. Pacific Decision Sciences Corp., 2006).
Example: A band agrees to perform at an event, but the venue burns down before the event date. Since the venue’s existence was essential for performance, the band’s obligation is excused. This illustrates how unforeseen circumstances can render a contract impossible to perform.
Performance Not Excused if Impossibility is Temporary
A temporary impossibility usually suspends the obligation to perform during the time it exists. The obligation to perform is not excused or discharged by a temporary impossibility, it is merely suspended, unless the delayed performance becomes materially more burdensome or the temporary impossibility becomes permanent. (Ibid.).
Example: A supplier faces a shipping delay due to bad weather, temporarily preventing delivery. Once conditions improve, the obligation to deliver resumes. This demonstrates that temporary impossibility does not cancel contractual obligations but merely delays them.
Performance Not Excused Because Performance is Difficult
However, where a party has agreed, without qualification, to perform an act which is not impossible, he is not excused by difficulty of performance or because he becomes unable to perform. (Lapid v. Diagnostics, 2006).
Example: A moving company agrees to relocate heavy machinery. If the machinery turns out to be heavier than expected, making the task more difficult, the company cannot claim difficulty as an excuse for non-performance. This shows that contracts must be honored despite unexpected challenges, as long as performance is possible.
Frustration of Purpose
Where performance remains possible, but the reason the parties entered the agreement has been frustrated by a supervening circumstance that was not anticipated, such that the value of performance by the party standing on the contract is substantially destroyed, the doctrine of frustration applies to excuse performance. (Habitat Trust for Wildlife, Inc. v. City of Rancho Cucamonga, 2009).
Example: A couple books a venue for a wedding, but a new government regulation prohibits gatherings of that size due to unforeseen circumstances. The value of the venue rental is substantially destroyed, so the couple may be excused from performance under the frustration of purpose doctrine.
Anticipatory Breach
An anticipatory breach of contract occurs when the contract is repudiated by the promisor before the promisor’s performance under the contract is due. (Central Valley General Hospital v. Smith, 2008).
Example: A contractor informs a client that they will not be completing the renovation a week before the due date. This is an anticipatory breach, as the contractor is declaring their intent not to perform before the agreed date.
If Plaintiff Breaches Contract, He or She Cannot Recover for Subsequent Breaches
A plaintiff who breaches a contract cannot recover for a subsequent material breach by the other party. (Plotnik v. Meihaus, 2012).
Example: If a homeowner fails to pay a contractor for work completed on time, the contractor’s subsequent delay in further work cannot be considered a breach for which the homeowner can seek recovery. This emphasizes that a plaintiff’s own breach limits their ability to claim for subsequent issues.
The unjustified or unexcused failure to perform any obligation of a contract is a breach. (Brown v. Grimes, 2011).
Example: A company contracts to deliver office supplies monthly but misses a scheduled delivery without any justification. This is a breach of their contractual obligation since the failure was neither justified nor excused.
No Breach Unless Performance Due
A defendant cannot be liable for breach of contract until the time specified for performance has arrived. (McCaskey v. California State Automobile Assn., 2010).
Example: If a contractor agrees to complete construction by June 30th, but it is only June 15th, the client cannot claim breach for unfinished work. The deadline for performance has not yet arrived.
Breach by Implied Repudiation
If the defendant voluntarily puts it out of their power to do what they agreed to in the contract, then they have breached the contract by an implied repudiation. (Martinez v. Scott Specialty Gases, Inc., 2000).
Example: A supplier agrees to provide materials but then sells all of their inventory, making it impossible to fulfill the order. This constitutes an implied repudiation since they voluntarily made it impossible to perform.
Breach When Performance Unlikely
If a defendant fails to perform under all or a portion of a contract but does not repudiate the contract and expresses a willingness to perform under the contract, the plaintiff may treat such non-performance as a total breach of the contract if the plaintiff believes performance is either unlikely or would be forthcoming only when it suited the defendant’s convenience. (Mammoth Lakes Land Acquisition, LLC v. Town of Mammoth Lakes, 2010).
Example: A contractor keeps delaying a project without outright refusing to finish it, making completion seem improbable. The client can consider this non-performance as a total breach if they believe the delays will only end at the contractor’s convenience.
Any breach, total or partial, which causes a measurable injury, gives the injured party a right to compensatory damages. (Brawley v. J.C. Interiors, Inc., 2008).
Example: A client hires a decorator who fails to complete the project, leading to financial losses from rescheduling an opening event. The client can seek compensatory damages for these losses caused by the decorator’s breach.
There are eight typical remedies for breach of contract in California. The remedy available to the plaintiff depends on the specific facts of each case, as explained below.
Compensatory Damages
For the breach of an obligation arising from a contract, the measure of damages is the amount that will compensate the aggrieved party for all detriments caused. (Civ. Code § 3300).
Restoration/Restitution
Restitution aims to restore the injured party to as good a position as before the contract, without compensating for consequential harms. (Ajaxo Inc. v. E*Trade Group Inc., 2005).
Certainty
Damages must be certain. No damages can be recovered for a breach of contract that are not clearly ascertainable in both their nature and origin. (Civ. Code § 3301).
Lost Profits
Lost profits may be recoverable as damages if the occurrence and extent are reasonably certain. (Sargon Enterprises, Inc. v. University of Southern California, 2012).
Rescission
If a party lacks the desire or ability to keep a breached contract alive, they may rescind and recover damages from the rescission. (Guan v. Hu, 2017).
Specific Performance
To obtain specific performance, the plaintiff must demonstrate that monetary compensation is inadequate. (Real Estate Analytics, LLC v. Vallas, 2008).
Specific Performance for Transfer of Real Property
It is presumed that a breach involving real property cannot be adequately remedied with money. (Civ. Code § 3387).
Injunction (Very Limited Availability)
Injunctive relief is at the court’s discretion, focusing on the inadequacy of damages and the harm to the defendant. (Health Net of California, Inc. v. Department of Health Services, 2003).
Generally, the limitations period is four years for written contracts and two years for oral agreements. (Civ. Proc. Code §§ 337(1), 339(1)).
Incompetence
A person deemed incompetent cannot enter into contracts until restored to capacity. (Civ. Code § 40).
Payment
If the defendant made the payment, the plaintiff cannot claim damages. (Emerald Bay Community Assn. v. Golden Eagle Ins. Corp., 2005).
Accord and Satisfaction
Accord and satisfaction is an agreement to accept something different or less than originally due. (Civ. Code § 1521).
Example: A creditor agrees to accept $5,000 instead of the original $10,000 owed by the debtor as full satisfaction.
Analysis: Once the debtor fulfills the new terms, the original obligation is extinguished. The creditor cannot demand the remaining balance, as they agreed to modify the original terms.
Novation
Novation substitutes a new obligation for an existing one. (Civ. Code § 1530).
Lack of Consideration
A contract requires sufficient consideration. Without it, the contract is invalid, meaning there can be no breach. (Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Assn., 2013).
Failure of Consideration
Failure of consideration occurs when one party does not fulfill their promise in exchange for performance by the other. (Rutherford Holdings, LLC v. Plaza Del Rey, 2014).
Prevention of Performance
If one party prevents the other from performing, the prevented party may recover damages as if they had performed. (Civ. Code § 1512).
Frustration of Purpose
Frustration of purpose occurs when an unforeseen event substantially destroys the value of the contract. (Lloyd v. Murphy, 1944).
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