Key Takeaways:

  • The amount you can sue for breach of contract depends on the type and extent of damages incurred, including compensatory, consequential, and punitive damages.
  • You must evaluate whether you have a strong case, whether settlement or mediation is preferable, and if the defendant can actually pay the judgment.
  • The statute of frauds and statute of limitations determine the validity and time frame for filing a breach of contract claim.
  • Small claims court is an option for cases within state-specific financial limits, while larger claims require a civil trial.
  • Alternative dispute resolution methods, such as mediation or arbitration, may be faster and less costly than litigation.
  • Punitive damages are rarely awarded in breach of contract cases unless fraud or malicious intent is proven.
  • Some contracts include clauses specifying damages in case of breach, which courts generally enforce unless deemed excessive.
  • Collecting damages can be challenging if the defendant lacks the financial means, requiring legal enforcement measures.

How much can you sue for breach of contract? That's just one of several questions you must ask yourself before you begin a lawsuit against the other party in a contract, whether it's a large or small amount.

Even before you consult with a lawyer, you should consider the following:

  • Do you have a good case?
  • If you do file a lawsuit, will you be satisfied with a settlement or an opportunity to have mediation instead of a full court ruling?
  • In the case that you do win a lawsuit in court, will you actually be able to collect the judgment you receive?

To determine if you have a good case and a good chance of winning the lawsuit, there is a checklist you can follow. This will vary depending on the individual circumstances of your lawsuit. Keep in mind that most cases in the U.S. legal system are settled outside of court instead of being brought before a judge. The best course of action is often to get together with the other party and see if a resolution to the problem can be reached before it goes to court.

No matter how good your case may be, consider how likely it is that you will receive money from the defendant even if you do win the lawsuit. If they have no way to pay you, all you will have left is a sense of victory for having won in court — and you will still have to pay your court fees, plus potentially an attorney as well.

The court can't help you collect the money you are due. If the defendant cannot pay, your next step is to go to the sheriff's office and ask for help with collecting on your judgment. This may include garnishment of wages, liens on the defendant's property, or collection of money directly from the defendant's business. However, if it's not likely that your defendant will be able to pay, you may want to reconsider filing the lawsuit in the first place.

What Can You Sue For?

When suing for breach of contract, there are several types of damages you can sue for. These include:

  • Compensatory damages, which are intended to bring the plaintiff to the same point as they would be if the contract was fulfilled.
  • Consequential damages, which include lost profits when the other party was aware that you needed them to fulfill the contract in order to earn profits from your business.
  • Liquidated damages, a clause for which is often included n the contract; it states the amount of damages that will be paid if the contract is breached.
  • Injunctions and Equitable Relief, which takes the place of a cash payment in a judgment and involves forcing the other party to either stop an action or take an action.

Understanding Punitive and Nominal Damages

In addition to compensatory, consequential, and liquidated damages, two other types of damages may apply in breach of contract cases:

  • Punitive Damages: Unlike compensatory damages, punitive damages serve to punish the breaching party rather than reimburse the plaintiff. Courts rarely award punitive damages in breach of contract cases unless there is evidence of fraud, malice, or willful misconduct.
  • Nominal Damages: If a breach occurred but did not result in significant financial loss, courts may award nominal damages as a symbolic acknowledgment that the contract was violated.

When to Sue for Breach of Contract

In most states, the Statute of Frauds states which kinds of contracts have to be in writing in order to be legally enforceable. These include:

  • Real estate sales
  • Agreements to pay another person's debt
  • Any contract that takes over a year to fulfill
  • A property lease for a year or more
  • Any contract that involves a certain amount of money, which is determined by the state
  • Contracts that continue to exist beyond one of the parties' death
  • Contracts that involve the transfer of property when one of the parties dies

Another rule affecting your ability to sue for breach of contract is the statute of limitations. This states a deadline for filing a lawsuit, and it depends on the individual case circumstances.

Statute of Limitations for Breach of Contract Claims

The statute of limitations for breach of contract lawsuits varies by state and depends on whether the contract was verbal or written. In general:

  • Written Contracts: The statute of limitations typically ranges from 3 to 10 years.
  • Oral Contracts: The time frame is generally shorter, often between 2 and 6 years.
  • Special Cases: If fraud is involved, an extended statute of limitations may apply, as courts may consider when the fraud was discovered.

If a lawsuit is filed after the statute of limitations expires, the defendant can request that the case be dismissed.

Where Do You Sue for Breach of Contract?

Small Claims Court is recommended if the amount of your loss falls within the limits set by the state. In most states, this ranges from $1.500 to $15,000. It's a fairly simple process, with the judgment taking place right away and limited right of appeal.

In a small claims court, attorneys are not typically involved, procedures are informal, and as long as you have thorough documentation, it should not be difficult to prove your case.

If your claim is more than the small claims court allows, you may sue the other party in a civil trial court, for which an attorney is recommended.

Mediation and Arbitration as Alternatives to Litigation

Lawsuits can be time-consuming and costly, making alternative dispute resolution methods such as mediation and arbitration attractive options:

  • Mediation: A neutral third party helps the disputing parties negotiate a settlement. Mediation is non-binding, meaning either party can walk away without an agreement.
  • Arbitration: A private arbitrator hears both sides of the case and issues a legally binding decision. Many business contracts include arbitration clauses, requiring disputes to be settled through arbitration rather than court litigation.

These options can lead to faster, less expensive resolutions compared to going to court.

Enforcing a Judgment and Collecting Damages

Winning a lawsuit does not guarantee you will receive payment. If the defendant refuses to pay, you may need to take additional legal steps:

  1. Wage Garnishment: If the defendant is employed, you may be able to request a court order requiring their employer to withhold a portion of their wages.
  2. Liens on Property: A court may allow you to place a lien on the defendant’s real estate or other property, preventing them from selling it without settling the debt.
  3. Bank Account Levy: You may obtain a legal order allowing funds to be withdrawn directly from the defendant’s bank account.
  4. Seizure of Business Assets: If the defendant owns a business, certain assets may be seized to satisfy the judgment.

If the defendant has no assets or income, collecting damages may be difficult. In such cases, a judgment may still be enforceable for several years, allowing you to collect later if their financial situation improves.

Frequently Asked Questions

  1. What is the maximum amount I can sue for breach of contract?
    • The amount depends on the damages incurred. Small claims court has limits ranging from $1,500 to $15,000, while larger claims must be filed in civil court.
  2. Can I sue for emotional distress in a breach of contract case?
    • Generally, breach of contract lawsuits focus on financial damages. Emotional distress claims typically require evidence of fraud or intentional misconduct.
  3. What happens if the defendant refuses to pay the judgment?
    • You may need to enforce the judgment through wage garnishment, property liens, or bank account levies.
  4. Is it better to settle a breach of contract dispute out of court?
    • Settling can save time and legal costs. Mediation or arbitration may also be viable alternatives to a lawsuit.
  5. Can a contract specify damages for a breach?
    • Yes, many contracts include liquidated damages clauses that predetermine the amount payable in case of a breach. Courts enforce these unless they are deemed excessive.

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