Breach of Contract Law in California

Brad Nakase, Attorney

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To recover damages from the defendant for breach of contract in California, the plaintiff must prove all of the following: (1) that plaintiff and defendant entered into a valid contract; (2) that plaintiff performed under the contract or that performance was excused; (3) that the defendant failed to perform under the contract; (4) that plaintiff was harmed; and (5) that defendant’s breach of contract was a substantial factor in causing the plaintiff’s harm. (CACI 303).

Elements of Breach of Contract California

The four basic elements of breach of contract are:

  1. The contract;
  2. Plaintiff’s performance or excuse for nonperformance;
  3. Defendant’s breach; and
  4. The resulting damages to plaintiff. (Kumaraperu v. Feldsted (2015) 237 Cal.App.4th 60.)

How to Plead Breach of Written Contract

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) 215 Cal.App.4th 972.)

Pleading a Contract by Its Legal Effect

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.)

Pleading Performance of Conditions Precedent

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.

Pleadings Subject to Demurrer and Dismissal

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).

ELEMENT 1: Valid Contract

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.

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) 15 Cal.App.4th 1243.)

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) 116 Cal.App.4th 1375.) (an action for breach of an oil and gas operating agreement, which provided for monthly payments or deliveries by the operator, was not time-barred because the monthly payments or deliveries were a series of severable contractual obligations).

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) 402 F. Supp. 3d 615.)

ELEMENT 2: Plaintiff’s Performance or Excuse for Non-Performance

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) 192 Cal.App.4th 265.) (Court held “before any party to an obligation can require another party to perform any act under it, he must fulfill all conditions precedent thereto imposed upon himself.”)

Plaintiff Must Allege Excuse for Non-Performance

If plaintiff was unable to perform because defendant prevented him from doing so, plaintiff must allege such excuse for non-performance in the complaint. (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350.)

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) 183 Cal.App.4th 1373.) This includes a party who prevents fulfillment of a condition of his own obligation under a contract. (Ibid.)

Waiver of plaintiff’s performance by the defendant.

The Defendant could waive Plaintiff’s performance under the contract or any conditions if the performance or conditions solely benefitted the defendant. (County of Solano v. Vallejo Redevelopment Agency (1999) 75 Cal.App.4th 1262.)

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) 137 Cal.App.4th 1001.)

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.)

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) Cal.App.Unpub. LEXIS 10746 (citing Caron v. Andrew (1955) 133 Cal.App.2d 402.))

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) 175 Cal.App.4th 1306.)

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) 162 Cal.App.4th 501.)

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) 208 Cal.App.4th 1590.)

ELEMENT 3: Defendant’s Breach

The unjustified or unexcused failure to perform any obligation of a contract is a breach. (Brown v. Grimes (2011) 192 Cal.App.4th 265.)

The breach can be the result of (1) the defendant’s specific acts or conduct; (2) the defendant’s negligent performance; or (3) the defendant’s failure to act or perform. (Nasrawi v. Buck Consultants LLC (2014) 231 Cal.App.4th 328.)

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) 189 Cal.App.4th.)

Breach by Implied Repudiation

If the defendant voluntarily puts it out of his power to do what he has agreed to in the contract, then he has breached the contract by an implied repudiation and is immediately liable for such breach, even though the time specified for performance has not yet expired. (Martinez v. Scott Specialty Gases, Inc. (2000) 83 Cal.App.4th 1236.)

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) 191 Cal.App.4th 435.)

Failure to Perform other Agreement is Not a Breach of Subject Contract

The defendant must be obligated to perform according to the specific terms of a contract and the failure to perform other agreements not part of the subject contract does not constitute a breach of contract. (Ibid.)

ELEMENT 4: Resulting Damage

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) 161 Cal.App.4th 1126.)

There are eight typical remedies for breach of contract in California. The remedy available to the plaintiff depends on facts which are explained below.

  • Compensatory Damages. For the breach of an obligation arising from contract, the measure of damages, except where otherwise expressly provided, is the amount which will compensate the party aggrieved for all the detriment proximately caused thereby, or which, in the ordinary course of things, would be likely to result therefrom. Civ. Code § 3300.
  • Restoration/Restitution. The purpose of restitution as a remedy for a breach of contract is the restoration of the injured party to as good a position as was occupied by him before the contract was made, without attempting to compensate him for consequential harms. (Ajaxo Inc. v. E*Trade Group Inc. (2005) 135 Cal.App.4th 21.)
  • Certainty. Damages must be certain.  No damages can be recovered for a breach of contract which are not clearly ascertainable in both their nature and origin. Civ. Code § 3301.
  • Lost Profits. Lost profits may be recoverable as damages for breach of contract.  The general principle is that damages for the loss of prospective profits are recoverable where the evidence makes reasonably certain their occurrence and extent.  (Sargon Enterprises, Inc. v. University of Southern California (2012) 55 Cal.4th 747.)
  • Rescission. When one party has been injured by a breach of contract and that party either lacks the ability or the desire to keep the contract alive, she or he can choose to treat the contract as rescinded and recover damages resulting from such rescission. (Guan v. Hu (2017) 12 Cal.App.5th 406.)
  • Specific Performance. To obtain specific performance after a breach of contract, a plaintiff must generally show the inadequacy of his or her legal remedy.  (Real Estate Analytics, LLC v. Vallas (2008) 160 Cal.App.4th 463.)
  • Specific Performance for Transfer of Real Property. It is to be presumed that the breach of an agreement to transfer real property cannot be adequately relieved by pecuniary compensation.  In the case of a single-family dwelling which the party seeking performance intends to occupy, the presumption is conclusive.  In all other cases, this presumption is a presumption affecting the burden of proof. Civ. Code § 3387.
  • Injunction (Very Limited Availability). Injunctive relief is largely within the discretion of the trial court, which takes into consideration (1) the inadequacy of damages to the plaintiff; and (2) the harm to the defendant in imposing such a reward. (Health Net of California, Inc. v. Department of Health Services (2003) 113 Cal.App.4th 224.)

Statute of limitations for breach of contract California

Generally, the limitations period is four years for written contracts. Civ. Proc. Code § 337(1).  For oral agreements, the statute of limitations is two years. Civ. Proc. Code § 339(1).

Affirmative Defenses for breach of contract in California

Incompetence

After a person’s incapacity has been judicially determined, a person of unsound mind can make no conveyance or other contract, nor delegate any power or waive any right, until his or her restoration to capacity.  Civ. Code § 40.

Payment

If payment has been made, the plaintiff will not be able to show that it suffered any contract damages. (Emerald Bay Community Assn. v. Golden Eagle Ins. Corp. (2005) 130 Cal.App.4th 1078.)

Accord and Satisfaction

An accord is an agreement to accept, in extinction of an obligation, something different from or less than that to which the person agreeing to accept is entitled. Civ. Code § 1521.

Novation

Novation is the substitution of a new obligation for an existing one. Civ. Code § 1530.

Lack of Consideration

There must be sufficient consideration in order to have a valid contract.  Lack of consideration would render the contract invalid and there would be no breach of contract claim as there is no contract. (Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Assn. (2013) 55 Cal.4th 1169.)

Failure of Consideration

Failure of consideration is the failure to execute a promise, the performance of which has been exchanged for performance by the other party. (Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221.)

Prevention of Performance

If the performance of an obligation be prevented by one party, the other party is entitled to all the benefits which he would have obtained if it had been performed by both parties. Civ. Code § 1512.

Frustration of Purpose

(Lloyd v. Murphy, 25 Cal. 2d 48, 53-55, 153 P.2d 47 (1944)).

Capacity

All persons are capable of contracting, except minors, persons of unsound mind, and persons deprived of civil rights. Civ. Code § 1556.

Mistake

An apparent consent is not real or free when obtained though mistake. Civ. Code § 1567(5).  Mistakes can be mistakes of fact or mistakes of law. Civ. Code §§ 1576-1578.

Undue Influence

Undue influence consists: (1) in the use, by one in whom a confidence is reposed by another, or who holds a real or apparent authority over him, of such confidence or authority for the purpose of obtaining an unfair advantage over him; (2) in taking an unfair advantage of another’s weakness of mind; or (3) in taking a grossly oppressive and unfair advantage of another’s necessities or distress. Civ. Code § 1575.

Duress

An apparent consent is not real or free when obtained through duress. Civ. Code § 1567(1).

Unclean Hands

The doctrine of unclean hands expresses that one may not take advantage of his own wrong.  Simply stated, the plaintiff cannot recover for breach of contract if his own hands are dirty (i.e. he breached the contract first.) Civ. Code § 3517.

Fraud

An apparent consent is not real or free when obtained through fraud. Civ. Code § 1567(3).

Illegality

The object of a contract must be lawful when the contract is made, and possible and ascertainable by the time the contract is to be performed. Civ. Code § 1596.

Unconscionability

Unconscionability ensures that an unsophisticated party is not taken advantage of by a sophisticated party.  If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or may enforce the remainder of the contract without the unconscionable clause. Civ. Code § 1670.5.

Contract Contrary to Public Policy

That is not lawful which is: (1) contrary to an express provision of law; (2) contrary to the policy of express law, though not expressly prohibited; or (3) otherwise contrary to good morals. Civ. Code § 1667.

Modification of Written Contract by Executed Oral Agreement

A contract in writing may be modified by a contract in writing or by an oral agreement to the extent that the oral agreement is executed by the parties. Unless the contract otherwise expressly provides, a contract in writing may be modified by oral agreement supported by new consideration.  Civ. Code §§ 1698(a)-(c).

Statute of Frauds

An agreement that by its terms is not to be performed within a year from the making thereof must be in writing. Civ. Code § 1624(a)(1).

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