If a contract is negotiated between two or more parties, and one party fails, without a legally valid excuse to meet his or her responsibilities as set forth in the contract, or if one party makes it impossible for the other party to perform as agreed, it is known as a breach of contract. When there is a breach of contract, one or both of the parties may wish to have the contract enforced on its terms, or may seek reparations for any financial harm caused by the alleged breach. If a dispute over a contract arises and informal attempts at resolution fail, the most common method used to resolve contract disputes and enforce contracts is through lawsuits and the court system.
Most of the time, but not always, in order to pursue a breach of contract lawsuit, the contract must be in writing. A majority of the states list all the types of contracts that must be in writing to be enforceable in a statute of frauds. To orally agree to a contract listed in a state’s statute of frauds, renders the contract unenforceable. The statute of frauds prevents people from making fraudulent claims. The laws according to the statute of frauds vary by state. They may include:
• Sales of real estate 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.
Another factor in determining whether or not an individual can sue for breach of contract is the statute of limitations. Statutes of limitations are laws that establish maximum period of time within which a lawsuit or claim may be filed. The deadlines vary by state and take into account the type of claim and the circumstances of the case. If a lawsuit or claim is not filed within the statute of limitations, the party suing gives up their right to file a lawsuit. However, a statute of limitations may be extended beyond its cut-off date under certain circumstances.
If a breach of contract lawsuit meets the criteria of both the statutes of fraud and limitations, it can be filed in court. Depending on the amount of money being sought for reparations, it may be handled in a small claims court. Although the dollar amount differs state by state for claims allowed in small claims court, it generally falls somewhere between $1,500 and $10,000. The procedures in small claims court are much more informal than in other types of litigation. Parties are generally not represented by attorneys in small claims court actions. The advantage of having a case heard in small claims court is that simple disputes are resolved more quickly and economically. However, appeal rights for both plaintiffs and defendants are limited in small claims court.
If the amount of the compensation an individual claims for the breach of contract exceeds the limited amount of a small claims court, a lawsuit may be filed in a trial court. If a person effectively sues for breach of contract, he or she is entitled to some kind of reprieve under law. These are called remedies and there are three main types: 1) damages; 2) specific performance; and 3) cancellation and restitution.