Contract Claims: Everything You Need to Know
Contract claims are court cases that result from a breach of contract and provides the injured party to a variety of remedies including monetary damages.3 min read
Contract claims are court cases that result from a breach of contract. When a party breaches a contract, and another party files a claim, the injured party will have access to a variety of remedies, including monetary damages and enforcement of the contract.
What is a Contract?
When two parties reach an agreement, this agreement is a contract. A contract creates a legal obligation between both parties. Both parties in a contract must fulfill their duties as specified in the contract. For instance, one party could be bound to deliver certain goods after receiving payment from the other party. An exchange of value, known as consideration, is a requirement for a contract to be legally valid.
Although courts lend more credence to written contracts, a contract can be either written or verbal. It's also possible for a person to enter into a contract through their actions. Parties can use contracts for the sale of both goods and services. A valid contract includes three important features:
- Mutual Assent: All contracted parties should understand the contract's subject matter and its specific terms.
- Offer and Acceptance: One party makes an offer indicating their willingness to enter a contract, and the other party unambiguously accepts the offer.
- Consideration: The parties agree to exchange something of value, whether money or performance of an act.
Contract Claims and Remedies
When a contract breach occurs, there are several different remedies that are available to the injured party. The remedies available in contract claims will depend on the nature of the breach, and can be either equitable or legal.
A legal remedy usually involves the party that breached the contract providing monetary restitution for the losses suffered by the other party. Legal remedies can take several different forms:
- Compensatory damages
- Consequential damages
- Liquidated damages
An equitable remedy requires that the breaching party take steps to make up for the breach. Equitable remedies can include canceling the contract, known as rescission, or reforming the contract. Both contract claims and remedies can be very complicated because it can be difficult to determine the actual harm caused by a contract breach. For a contract breach to exist, there must be four crucial elements:
- Formation of a contract.
- The contract includes enforceable performance terms.
- One party does not perform their contractual obligations.
- The failure to perform injures the other party.
How Contract Claims Are Evaluated
When you hire a lawyer to bring a contract claim, the first issue that they will examine is if a valid contract was actually formed. For a contract to exist, one person must have proposed specific terms that the other party accepted. This process of offer and acceptance is commonly referred to as a meeting of the minds.
Documenting a contract in writing is the easiest way to prove the formation of an agreement, although there is no specific requirement that contracts must be in writing. Many contracts are verbal, and some contracts are formed through the actions of the party. If there is a written and signed contract, however, it should be easy to prove formation. If a contract is not in writing, proving formation and legal enforceability can be very difficult, even for the most experienced attorneys.
Once your attorney establishes that a contract was indeed formed, they will examine whether the agreement is legally enforceable. For a contract to be enforceable, it must contain detailed terms and clearly specify the responsibilities of all parties involved. Without specific terms, it will be hard to prove whether offer and acceptance has actually occurred. Also, a lack of defined terms will make it less likely that the Courts will enforce the contract. A contract is not enforceable if it requires that the parties participate in illegal acts.
If a contract exists and it is enforceable, your attorney's next step will be proving that a breach of the contract actually occurred. Contract breaches are a result of a failure to perform, meaning one or both of the parties has not fulfilled their legal obligations. For example, if you've paid for goods and then the company you paid did not deliver your goods, this would be a failure to perform.
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