What is Breach of Contract?
When you make an oral or written agreement with someone who does not live up to their end of the bargain, you may be able to recover by making a breach of contract claim. When a claim is brought correctly, the plaintiff can also recover his or her attorney’s fees.
What are the Elements of a Breach of Contract Claim?
There are four elements to a breach of contract claim:
1) The existence of a valid contract;
2) performance by the plaintiff;
3) breach of the contract by the defendant; and
4) damages to the plaintiff resulting from that breach.
See Wright v. Christian & Smith, 950 S.W.2d 411, 412 (Tex.App.-Houston [1st Dist.] 1997, no writ).
A plaintiff should be careful to review these elements and what they mean. Keep in mind that all four elements are required — close doesn’t count. Many contracts have fee shifting provisions where the loser pays, so a failure to properly prove up your case can become expensive.
Element 1: The Existence of a Valid Contract
It’s a common misconception that piece of paper that calls for something to happen and that is signed by two parties makes a valid contract. There are a great number of reasons why a contract may be invalid. The Supreme Court of Texas has held that a contract to do a thing which cannot be performed without violation of the law violates public policy and is void. See Philadelphia Indem. Ins. Co. v. White, 490 S.W.3d 468, 483 (Tex. 2016)
A purported contract, in addition to not being illegal, must have each of the following elements:
1) an offer;
2) an acceptance in strict compliance with the terms of the offer;
3) a meeting of the minds;
4) a communication that each party consented to the terms of the contract;
5) execution and delivery of the contract with an intent it become mutual and binding on both parties; and
6) consideration (exchange of value).
See Coleman v. Reich, 417 S.W.3d 488, 491 (Tex.App.—Houston [14th Dist.] 2013, no pet.) (citing Advantage Physical Therapy, Inc. v. Cruse, 165 S.W.3d 21, 24 (Tex.App.—Houston [14th Dist.] 2005, no pet.))
Elements 2: Performance by the Plaintiff
In order for the plaintiff to prove its claim for breach of contract, it will need to show that it has taken steps to satisfy its obligations under the contract. Why should the defendant be required to perform when the plaintiff has not done so?
Element 3: Breach of the Contract by the Defendant
This element may seem obvious, but it becomes an issue in many cases. There are plenty of things that can go wrong in a contract that are not the fault of one of the parties or do not constitute a breach. The parties to a contract about a project gone wrong often disagree about the cause and who should be responsible.
Element 4: Damages to the Plaintiff Resulting from that Breach
Some breaches have no damages. Other breaches harm persons other than the plaintiff. Further still, damages to the plaintiff may result from something other than a breach. Unless the plaintiff can show its damages to have arisen as a result of the defendant’s breach, it will not prevail on the claim.
How long do I have to bring a breach of contract claim?
Unless the plaintiff asserts a legitimate ground for tolling the statute of limitations, a claim for breach of contract must be brought within four years of the breach.
Can Attorney’s Fees Be Recovered for Breach of Contract?
The answer depends on your defendant. The Texas Civil Practice & Remedies Code Sec. 38.001 states that a person may recover reasonable attorney’s fees from an individual or corporation, in addition to the amount of a valid claim and costs, if the claim is for …an oral or written contract.
Recent case law has given much attention to Chapter 38’s language specifying an “individual or corporation.” Noticeably absent from that list of breaching parties who must pay attorney’s fees are limited liability companies (LLCs), limited partnerships (LPs), and limited liability partnerships (LLPs). The takeaway is that if you are suing an LLC, an LP, or an LLP, you will need to look beyond Tex. R. Civ. P. Sec. 38 to collect attorney’s fees.
The nuances of this law should also be considered during business formation. There is significant value to be gained by limiting future exposure.
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This page was originally posted on 5/14/2018.