What is a Breach of Contract in California?

A breach of contract in California arose when a party to a contract failed to achieve a legal duty the contract created. When a party to a contract fails to fulfill the terms of a binding contract, they are liable for damages for breaching the contract.

Author: Brad Nakase, Attorney

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A contract may be defined as a legal agreement between two parties that creates obligations for both to meet. Each party, whether a person or company, who enters into the contract must perform their contract requirements. They also have a right to expect the other party to fulfill their part of the bargain.

When one party does not hold up their part of the bargain, this is considered a breach of contract in the state of California. For instance, if an agreement required a handyman to fix a broken sink and the handyman does not fix the sink as promised, this would qualify as a breach of contract. When it comes to the legal remedies available to victims of a contract breach, it will depend on whether the breach is considered material or not.

A breach can happen whenever an individual or group fails to perform their part of a bargain, whether the failure is major or minor in nature. The parties involved in a contract are required to fulfill all the requirements present in the agreement. This is the case even if one or both parties did not read the terms of the contract. If a failure to perform happens, then the victim party can file a lawsuit against the breaching individual or company to get damages.

There are various defenses to a breach of contract. A person or company will technically not be in breach if there is a legal reason for them to have not performed as promised. For instance, if a contract required a homeowner to sell his house, but the house burned down before the transaction went through, the homeowner has a valid justification for not selling the property as agreed in the contract. In this case, the homeowner would likely not be considered in breach of contract.

Remedies for a Breach of Contract in California

When there is a breach of contract, the victimized party has several possible avenues to take, which include the following:

  • Declining to do his or her part of the contract. For instance, if a handyman fails to fix a broken sink, then the homeowner who had the agreement with the handyman does not need to pay the bill even though the contract says the homeowner must pay the handyman for their work.
  • Filing a lawsuit to recover monetary damages. The party that did not breach the contract can get payment for demonstrable losses that occurred as a result of the other party’s inability or failure to fulfill the agreement according to its terms.
  • Filing a lawsuit to force a certain performance or action. The party that did not breach the contract can on occasion force the other party to fulfill their contractual duties. For instance, a buyer could make a homeowner sell a home if there existed a contract of sale, even if the homeowner changed his or her mind.

The issue of breach of contract becomes more complex when the contract was not in writing. Verbal contracts are much more difficult to prove, so when one is broken, both parties may struggle to argue their point of view, leading to a legal duel.

What Is a Verbal Contract?

A verbal contract is an unwritten but legally binding agreement between parties that includes all the regular elements of a contract and follows the Statute of Frauds. Oral contracts can be complicated because of the fact that they are not recorded in writing. If there is an argument about the terms of the contract or its existence, then there is no written record to study to solve the argument.

Rather, the terms of the agreement often have to be determined by testimony offered by the parties involved. Witnesses may also help reconstruct the terms of the contract, as well as the conduct of the parties after the deal was created.

Because most verbal agreements are created by trusting individuals, unfortunately, the arguments that result from breached verbal contracts tend to be emotional affairs.

Despite their drawbacks, verbal contracts are still used in California. Sometimes, this is due to business necessity, as can sometimes happen when a deal is struck and there is no pen or paper. Other times, parties may strike a deal and seal it with an unwritten “handshake.” Both situations rely on trust between the parties.

What Are the Elements of a Verbal Contract?

Although it is preferable to get a contract in writing, oral and verbal contracts are valid in the state of California. For a verbal contract to be considered valid and legitimate, it must contain te following three elements of an enforceable agreement:

  • An offer
  • An acceptance of that offer
  • Consideration

If any of the above elements is not present in an oral agreement, then the agreement is not legally binding and, thereby, there is no enforceable contract.

Also, verbal contracts must comply with the California Statute of Frauds. This statute provides that verbal contracts are not to be used in certain situations.

What Is the Offer?

The first element of a verbal contract is known as the offer. An offer happens when one party suggest terms that are clear enough for a reasonable person to understand and follow. Not all of the terms must be included for the contract to be enforceable by law. The only terms that must be included are those that are material, or important, for the particular contract. Such terms may include the following:

  • The parties of the contract
  • The services or goods that are to be provided
  • When the services or goods will be provided
  • The price

Sometimes, the person who is receiving the offer will reply with an offer of their own. That is, they might not accept the terms of the original offer and prepare a counter. Offers and counter-offers in verbal negotiations can happen quickly, sometimes within only seconds. The specific words used, and the context surrounding them, can make a difference. This is part of the reason why verbal contracts are hard to enforce. When parties dispute a verbal contract, they will often debate the precise wording of the offer, with one party claiming that no contract existed.

What Is the Acceptance?

The offer, in addition to any counter-offer, need to be accepted for there to be a legally-binding contract. Acceptance happens when a party agrees to the terms of the offer. With a verbal contract, acceptance can be very simple. In fact, it can be as simple as saying the following words:

  • “Agreed.”
  • “I accept.”
  • “Sure.”
  • “Let’s do it.”
  • “Sounds good, you’ve got a deal.”
  • “I don’t like it, but alright.”

As is the case with an offer, the specific phrasing of an acceptance can be important. If there is an argument between parties, then each party will provide their own version of what happened. It is very difficult to prove what actually occurred.

Many verbal agreements are often sealed with a handshake as a way of indicating that a deal has been reached. The handshake is a strong signal that the parties involved wish to be bound by the terms of the deal. That said, in a court of law, even a handshake can be disputed by a party trying to prove that no deal existed. In order to help show that a handshake occurred, it it helpful to have a witness to the event.

What Is the Consideration?

A legal term, consideration refers to the idea that both parties involved in a deal are giving up something in exchange for the contract. In most verbal contracts, the consideration will be the exchange of money for services or goods.

If only one side is offering something, then the agreement is likely a gift instead of a contract. If the agreement is a gift, then there is no valid contract that gives each side rights and obligations.

Are Verbal Contracts Enforceable by Law?

Verbal contracts between parties are enforceable by law in the same way that written agreements are, providing that they do not violate the Statute of Frauds. Similar to written contracts, oral agreements simply need to meet the requirements of a legitimate contract to be enforced by a court. If the contract meets the said requirements, then both verbal and written contracts are enforceable.

That said, it is far more complicated and challenging to prove the terms of a verbal agreement than a written one. When parties are arguing about a written document, the terms of the agreement may be found in a physical document for reference. However, when there is no document to refer to, it is harder to determine the rights and obligations of each party. The terms of the agreement, and whether or not there even was an agreement, must first be settled. This situation often turns into a “he said, she said” argument. Each side will present their version of events, trying to prove themselves more credible.

How Can a Verbal Contract Be Enforced?

Enforcing a verbal contract will depend largely on the particular circumstances of the case. That said, many cases involve the following elements:

  • The behavior of the parties following the creation of the alleged contract
  • Prior behavior between the parties
  • How similar agreements are normally conducted
  • Testimony of the parties involved
  • Witness testimony
  • Each party’s credibility

Evidence such as that described above will help a court determine the basic terms of the contract, as well as whether the contract was breached.

How Does One Prove the Terms of a Verbal Contract?

To prove the terms of a verbal contract, often there must be testimony from both parties as well as details of their conduct before and after the agreement was made.

It is true that the testimony often turns into a “he said, she said” situation, however any inconsistencies in one’s side story can be a sign they are not credible or reliable. This would provide evidence that an agreement was not structured the way they said it was.

In general, the behavior of the parties before and after the supposed contract is the most telling and is more reliable than any testimony. For instance, if one party paid the other, this acts as evidence that there was an agreement of some kind. If a good or service was provided sometime around this payment, then the terms of the verbal contract become a little clearer.

Other written documentation may prove useful, even if not an actual contract. For example, invoices, emails, letters, and text messages can offer indirect evident of a verbal agreement. Perhaps there was a text message asking, “when will the item be delivered?” This kind of message would show that one party believed there to be an agreement.

On occasion, a witness may be called to offer eyewitness testimony. Witnesses might include third parties who were present at the time a contract was established. Evidence may also be gathered from individuals who were unknowingly a part of the agreement, such as employees of one of the parties. These individuals can testify what they believed the agreement to be, if it existed, based on how their job duties changed before, during, and after the verbal contract was made.

As is evident, it can be quite complicated to determine the nature of a verbal agreement. Determining the details of the contract involved a lot of indirect and circumstantial evidence from many different sources.

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