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301-862-4400
22335 Exploration Drive Ste. 2030
Lexington Park, MD 20653
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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
  2)       A 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 modified. 

  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 formed.   

  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:

  Money 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 costs involved.

  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 occurred.

  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 as well.

  Specific 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.

  Injunctive 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 future obligations.

  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. 

 

The Law Offices of Baldwin, Briscoe & Steinmetz, P.C. also offers these services:

Bankruptcy and ForeclosureBusiness LawCivil LitigationCriminal DefenseFamily LawGovernment Contracts LawIntellectual Property, Personal InjuryReal Estate, and Wills, Trusts, & Estates

 


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The Law Offices of Baldwin, Briscoe & Steinmetz, P.C.

22335 Exploration Drive

Suite 2030

Lexington Park, MD 20653

301-862-4400 Phone

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Samuel C.P. Baldwin, Jr., Esq.

Janice Briscoe, Esq.

Richard J. Steinmetz Jr., Esq.

David J. Hebb, Esq.

Sandra Kaufman Jonasen, Esq.


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With an office conveniently located in Lexington Park, The Law Offices of Baldwin, Briscoe & Stienmetz, P.C. serves clients in the counties and cities of Lexington Park, Leonardtown, Hollywood, Mechanicsville, Loveville, Helen, Breton Bay, Chaptico, Charlotte Hall, Golden Beach, Avenue, La Plata, Waldorf, Newburg, Port Tobacco, Port Charles, Solomons Island, Prince Frederick, Chesapeake Shores, Hughesville, Benedict, Nanjemoy, Lusby, Port Republic, St. Mary's County, Charles County, Calvert County, Prince George's County, Southern Maryland.


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