If you are involved in a contract and the other party fails to live up to their end of the contract, what can you do? One option is suing for breach of contract.
A breach of contract occurs when one of the parties fails to live up to his or her responsibilities under a contract. This can include:
- Failing to perform as promised
- Making it impossible for the other party to perform as promised; or
- Making it known there is an intention not to perform
Under what circumstances can you sue for breach of contract? First, your contract has to be in writing. Most states have a law called the Statute of Frauds that specifies which types of contracts must be in writing to be enforceable. In most states these include:
- Sales of real property
- Promises to pay someone else's debt
- A contract that takes longer than one year to complete
- Property leases for more than one year
- Contracts for more than a certain amount of money, the amount of which is set by the state
- A contract that will go beyond the lifetime of the one performing the contract
- The transfer of property upon the death of the party performing the contract
Second, you must sue within the statute of limitations. Statutes of limitations are laws that set the deadline within which a lawsuit or claim may be filed. The deadlines vary depending on the circumstances of the case, the type of case, your state, and whether the suit or claim is filed in federal or state court. A chart listing common statutes of limitations is available at Nolo.com.
For a detailed discussion of statute of limitations, go to Statute of Limitations Basics at AllBusiness.com.
Where Should I Sue?
You might want to sue for breach of contract in small claims court if the damages you will request fall within its limited jurisdictional amounts. Small claims courts resolve simple disputes quickly and allow claims for dollar amounts ranging from $1,500 to $15,000. The judgment is usually rendered immediately, and appeal rights are limited.
Parties in small claims court are not usually represented by attorneys, and procedures are much more informal than in other types of litigation. As long as you have documentation regarding the breach, preferably a written contract and other evidence, you should be able to prove your case. Also consider any defenses the other party might make and how you will address them.
For a detailed discussion of suing in small claims court, go to Small Claims Court Basics at AllBusiness.com.
If the damages you are seeking exceed the jurisdiction of a small claims court, consider suing in a civil trial court. You can represent yourself in civil trial court, but it's not recommended. Trial courts are formal settings that require you to follow complex rules and procedures for bringing a lawsuit. It also costs more to file a suit in civil trial court.
What Happens if I Win?
After you successfully sue for breach of contract, you are entitled to a remedy, which may include:
- Damages: payment by the breaching party to the non-breaching party
- Specific performance: compels the breaching party to do what was agreed to under the contract
- Cancellation and restitution: If the non-breaching party has performed under the contract, the non-breaching party can cancel the contract and sue for restitution, which will put the non-breaching party in the same position as before the breach.