Breach of Contract
The attorneys at Baldwin, Briscoe & Steinmetz, P.C.
have years of experience litigating breach of contract matters. A contract is simply a promise or set of
promises, which if breached, the law will provide a remedy. Under Maryland law, the court will generally
try to give effect to the parties’ intentions.
A breach of contract occurs when someone fails
to do what they’ve agreed to do. Some
common examples of breaches include failing to pay a debt when it becomes due,
or failing to perform on a promise. This
might, for example, occur where someone agrees to sell a piece of real estate,
but then refuses to go to settlement.
In order to obtain relief from the court, the
plaintiff, in a breach of contract case, must allege and prove two things:
1) The existence of a contractual obligation
owed by the defendant to the plaintiff; and
material breach of that obligation by the defendant.
A complaint is a paper that is filled out by
the plaintiff or their attorney, and filed with the court, that sets out the
facts giving rise to the dispute between the plaintiff and the defendant. The complaint must also contain a request for
the relief requested, that is what the plaintiff is asking the court to
do. The plaintiff can ask for various
forms of relief, including money damages, an injunction, specific performance
or declaratory relief.
Maryland law recognizes the existence of both
oral and written contracts and a plaintiff can generally sue to enforce
either. In the case of oral contracts,
the plaintiff must sometimes prove the existence of the contractual obligation
through circumstantial evidence. Another
important fact to keep in mind is that a written contract can be orally
In a breach of contract claim, the plaintiff
bears the burden of proof. This means
that the plaintiff both establish a prima facie case and demonstrate a
preponderance of the evidence in its favor.
In order to establish a prima facie case, the plaintiff must provide
some evidence as to each element. That
means that the plaintiff must provide testimony, documents, or other evidence
that establishes both the existence of a contractual obligation and that the
defendant breached that obligation.
Assuming that the plaintiff is able to meet its initial burden, the
defendant will have the opportunity to present evidence in the case that
refutes that of the plaintiff. At the
end of the case, the judge or jury must decide whether it is more likely than
not that both there was a contractual obligation owed by the defendant to the
plaintiff and that the defendant did not meet that obligation, and if so, what
remedy is appropriate.
Breach of contract cases sometimes arise
because the parties have a disagreement over what the contract requires them to
do. This may be based on either some
ambiguity in the contract, or a dispute over what a term means. The law requires courts to give effect to
what the parties stated in the contract, if possible, regardless of their
subjective intentions. Courts generally
interpret contracts by using a reasonable person standard. That is they seek to determine what a
reasonable person in the position of the contracting parties would think that
the term means. When a court is able to
determine the meaning of the contract based on the document itself, it will not
look to outside sources for assistance.
Where a contract is truly ambiguous, however, the court will consider
evidence outside of the contract itself to help reach a determination as to
what the parties intended. A contract is ambiguous when it is susceptible to
more than one interpretation by a reasonable person.
In order to form a valid contract, there must
be an offer, acceptance and consideration.
An offer is simply a communication from one party to another of a desire
to enter into an agreement. The offer
must be sufficiently detailed and clear that it can be accepted by the other
party. The offer must contain the
necessary terms in order to be binding if accepted. For instance, “I’ll sell you my car if you
have the money” is not an offer. “I’ll
sell you my car for $5,000 if you can pay me in cash by Friday, and I’ll
deliver it at that time in its present condition” is an offer.
An offer can requires a written or formal
acceptance, but otherwise the offer can be accepted informally or by
action. If you make an offer to purchase
a home, for instance, you would fill out a written contract, sign it and
present it to the seller or their real estate agent. In order to accept the offer, the seller must
sign the contract and return the signed contract to you, or your agent. This is
a formal acceptance. On the other hand,
a store or vendor may have something for sale.
You go to the register and hand over your money and the contract is
completed, no documentation needed. The
real estate contract example is sometimes referred to as a bilateral contract,
whereas a contract that is completed by performance is sometimes referred to as
a unilateral contract or implied contract.
Some contracts, by law, must be in writing to
be enforced. For example, a contract to
sell real property is not enforceable unless it is in writing. This is referred to as the Maryland statute
of frauds. In these cases, however, “a
writing” does not necessarily mean a formally prepared contract as a business
might ordinarily create. An exchange of
letters or emails between the parties, if it shows the existence of the
contract, will ordinarily be sufficient to constitute a writing. This may be true even if the writing is
inaccurate or incomplete. Often litigation
arises because the parties have a disagreement over whether a contract was
formed, or what its terms are, when there has been an informal exchange of
correspondence, including email.
Written contracts may contain implied terms in
addition to the express terms that are set forth on the paper. Under Maryland law, every contract, with the
exception of at-will employment contracts, contains an implied term of good
faith and fair dealing. Many times this
will come up in partnership agreements or other contracts where some fiduciary
duty is present. Sometimes there are
other implied terms based on the circumstances under which the contract was
One area which has resulted in much litigation
is that of letters of intent. Letters of
intent generally come about during the course of negotiation, but are generally
not a final agreement between the parties.
Depending on the language within the letter of intent, however, the
party making the offer, i.e., sending the letter, may express an intention to
be bound by its terms. Whether or not
the letter of intent can be accepted as an offer is a question that is decided
by the court on a case-by-case basis.
As stated above a valid contract requires
consideration. Consideration is an
exchange of something of value between the parties. It may be money, property, or simply a
promise. If I promise to give you
something, but there is no agreement that I’ll get anything in exchange, there
is a lack of consideration and therefore no binding contract. Even if I promise in writing to give you
something, without consideration, that promise is unenforceable. On the other hand, if you promise to give me
something in return, or to do something, or not do something, then we have a
binding contract. Uncle Bob’s promise to
his nephew Tommy to give him $100 next week is not enforceable. Uncle Bob’s promise to give Tommy $100 if he
gets all A’s in school this quarter is enforceable. (Tommy’s getting the A’s is the consideration
that makes the difference.)
Some contracts are made for the benefit of a
person not a party to the contract.
These contracts can be enforced by the party that is the intended
beneficiary. These are enforceable by
the intended beneficiary, even though they are not a party. The intent to create a third-party
beneficiary must be evident from the contract itself. A life insurance policy is typical example of
a third-party beneficiary contract. The
person receiving the proceeds of the insurance payout is someone other than the
party who made the contract. Even though
that person was not a party to the contract, that person has the legal right to
enforce the contract, including by filing a lawsuit if necessary.
In a dispute that involves a bilateral
contract, the plaintiff must prove that it performed its duties or obligations
under the contract. Plaintiff must also
prove that the defendant’s breach of contract was material. This means that it was important or
significant. If a plaintiff agrees to
purchase a product and the contract requires delivery in thirty days, delivery
by the defendant on the thirty-first day does not necessarily constitute a
material breach of contract. It might
not be important that the product was delivered exactly on the date
agreed. If, however, the parties state
in the contract that delivery on the agreed date is a material part of the
agreement, then failure to do so would be a material breach. Parties often create materiality by using a
“time is of the essence” clause in their contract. This means that when a date is specified for
someone to take action or perform, they must do so by that date, not near or
shortly after the date stated.
As mentioned previously, the remedies
available to a plaintiff in a breach of contract case include money damages,
specific performance, injunctive relief and declaratory relief. Here’s an overview of how these work:
Damages. This is the most common
remedy sought in breach-of-contract actions.
Money damages may be awarded for losses that were proximately caused by
the defendant’s breach, that were reasonably foreseeable, and that are proven
with reasonable certainty. Reasonable
foreseeable means that the damages are those that would arise naturally out of
the breach of contract. Moreover, a
plaintiff can recover damages that are reasonably supposed to have been in the
mind of both parties at the time that
the contract was formed.
The question of forseeability often comes up
concerning the issue of a claim for lost profits. In these cases, the plaintiff must prove that
the defendant could have reasonably foreseen that the lost profits would probably
result from the breach and the lost profits can be proved with reasonable
certainty. So, for example, if the
breach of contract is for failure to deliver a truckload of hot dogs on time, a
hot dog stand with a proven sales record
will be more likely to recover damages for lost profits than would a brand new
business. The new business, however, may
still be able to recover the cost of obtaining alternative product including
any price premium that had to be paid, and the added transportation and labor
One form of money damages are liquidated
damages. Liquidated damages are damages
that are agreed to in the contract prior to any breach. The parties can, by agreement, set the amount
of damages that will result in the event of a breach. Courts will enforce these clauses if they
meet three conditions: (1) a liquidated damages clause must be clear and
unambiguous on its terms; (2) the damages provided for must reasonably
compensate the damaged party for the breach; and (3) the clause is written in a
way that it is binding and not subject to alteration after the breach has
Usually, a non-breaching party has a duty to
mitigate, or take reasonable steps to avoid unnecessary damages resulting from
the breach. Where a contract has a liquidated
damages clause, however, there is no duty to mitigate. Unlike some other areas of law, Maryland does
not permit punitive damages in a breach of contract case. Nevertheless, if there is a tort remedy that
gives the plaintiff the right to recover punitive damages, such damages may be
recovered despite the fact that there is a valid claim for breach of contract
Performance. Specific performance is
a remedy where the court orders a part to a contract to do what they contracted
to do. An example of this is where a
party has contracted to sell a piece of property to another party, but then
refuse to go to settlement. In these
cases, the court can issue an order requiring the breaching party to complete
what it agreed to do in the contract.
Alternatively, the court may appoint a trustee to convey the property
that was contracted for on behalf of the breaching party.
Relief. Sometimes a plaintiff in a
breach of contract case will seek injunctive relief. An injunction is an order from the court
requiring the defendant to do something, or to refrain from taking some
behavior. A specific performance case,
discussed above, is one form of injunctive relief. The court may pass other forms of
injunctions, as well, such as prohibiting a party from disposing of certain
property until certain conditions have been met.
Declaratory Relief. In some cases, the plaintiff is seeking
declaratory relief. Declaratory relief
is different from an injunction or money damages in that it seeks an
interpretation of the contract. Sometimes
a declaratory relief can be used when a party is uncertain of its rights or
obligations under a contract. A person
who is entitled to a sales commission, for example, may file a complaint for
declaratory relief prior to the completion of the sale but after some action
taken by the principal which gives them cause to believe they will not be
paid. In that case, the court can issue
an order stating that if the sale occurs, the person is or is not entitled to a
commission. Declaratory relief can be
used defensively as well. If a person
wishes to terminate the relationship, but fears that some cost may be incurred
in the future, they can seek declaratory relief from the court setting out the
The attorneys at Baldwin, Briscoe & Steinmetz, P.C. have
years of experience in litigating breach of contract cases. A consultation with one of our experienced
breach of contract attorneys can provide you appropriate advice as to your
rights and obligations concerning any particular contract. Contracts are often complex instruments and
an attorney can only give you advice after learning about the particular facts
of your situation.
The information contained on this page is
provided as general information and does not constitute legal advice. The experienced attorneys at Baldwin, Briscoe & Steinmetz, P.C. can assist you if you are involved in a contract dispute. We’d be happy to sit down with you and review
your situation and provide appropriate advice.
Call today for your no-obligation consultation.
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