Contract Disputes

Breach of Contract QUICK LINKS

What are the types of contracts?

What are the elements of a contract?

Are verbal and oral contracts enforceable?

What types of contracts must be in writing?

How does one go about enforcing a contract?

If I breach my duty under a contract, do I have any defense?

Why Hire Steve Crane Jr?

What are the various types of contracts?

It would be impossible to provide a comprehensive list of all business and commercial contracts without occupying multiple volumes of text. Nonetheless, Steve has seen certain types of contracts that are common in breach of contract claims:

• Employment contracts: employee or independent contractor agreements, non-compete agreements, non-solicitation agreements, trade secret disputes.
• Commercial contracts: purchase and sales agreements, vendor agreements, trade agreements, supply contracts, parts contracts.
• Service contracts: construction contracts, utility contracts.
• Real estate contracts: real property sales contracts, lease agreements.
• Business contracts: partnership agreements, business sales and merger agreements, investment and capital agreements, joint venture agreements, franchise agreements, disputes over fair market value.

What are the elements of a contract?

A contract is essentially an agreement in which one party makes an offer, another party accepts, and both parties are obligated to do something. A party’s contribution to the agreement, known as “consideration,” could involve payment of money or something else of value, abstention from a specific action, or a promise to perform a service or other action. Except in certain circumstances, a contract need not be in writing to be enforceable, although the burden is on the party claiming breach to prove the existence of a contract.

Are verbal and oral contracts enforceable?

As a general rule, oral contracts are enforceable. Even though the parties have not executed a written agreement, the parties’ contract can be established based on their conduct. Objectively, if the parties appear to be conducting themselves as if they have formed a contract, then that contract is enforceable even though there is no written instrument. Some courts term this conduct “objective theory of contract,” and when parties form an agreement by conduct, the agreement is called an “implied-in-fact” contract.

In Michigan, it is well-accepted that an implied-in-fact contract can be established based on circumstantial evidence of an agreement between the parties. In other words, custom and practice as to what a reasonable person would understand under the circumstances are crucial. The accepted rule has been articulated by Michigan courts as follows:

“A contract implied in fact arises under circumstances which, according to the ordinary course of dealing and common understanding, of men, show a mutual intention to contract. In re Munro’s Estate, 296 Mich. 80; 295 N.W. 567 (1941). A contract is implied in fact where the intention as to it is not manifested by direct or explicit words between the parties but is to be gathered by implication or proper deduction from the conduct of the parties, language used or things done by them, or other pertinent circumstances attending the transaction. Miller v Stevens, 224 Mich. 626; 195 N.W. 481 (1923). The existence of an implied contract, of necessity turning on inferences drawn from given circumstances, usually involves a question of fact, unless no essential facts are in dispute.” Auburn v. Brown, 60 Mich. App. 258, 265-66 (Mich. Ct. App. 1975).

What types of contracts must be in writing?

Like most things, there exists an exception to the general rule that oral agreements are enforceable. The exception to the rule is the “statute of frauds.” In Michigan, the following types of contracts to be in writing according to the statute of frauds:

• interests in land
• performance beyond one year
• promises to pay the debt of another
• marital contracts
• liability of a personal representative
• real estate commission agreements
• assignments of things in action
• medical cure contracts
• promises by financial institutions
• misrepresentations regarding credit
• modifications of contracts without consideration
• sales of goods over $1,000
• sales of personal property
• subscriptions of shares and agreements regarding legal proceedings

Even if a contract does not comply with the statute of frauds, under a legal concept termed “partial performance,” to avoid an unjust outcome, a court may still enforce an oral agreement which violates the statute of frauds when one party has performed in reliance on an agreement to such an extent that it would be a fraud on or fundamentally unjust to the performing party not to enforce it.

How does one go about enforcing a contract?

To enforce a contract, the party claiming breach must show the existence of a valid and binding contract and demonstrate the breach. That party must also prove damages, which could be the amount expended in reliance on the other party’s performance of the contract or the amount of value the party expected to obtain but for the breach of the contract. In some situations, such as a real estate sales contract, a party can claim, “specific performance,” meaning the party in breach must fulfill its contractual obligations rather than pay monetary damages.

If I breach my duty under a contract, do I have any defense?

Yes. If a court determines that a party substantially performed their obligation as required by the contract, and the breach only involves minor deviations from the agreement, then the court would not hold the party liable for breach of contract. This is termed “substantial performance.” Even if substantial performance does not apply, there are still defenses that can be used by the party that breached the contract to avoid liability. These defenses include among others:

• Lack of Capacity: Certain people, such as minors and the mentally ill, lack the capacity to enter into a legal contract. This means that, if someone were to sue a teenager for failing to fulfill her obligation under a contract, the teenager would be able to escape liability by using the argument that she lacked the capacity to sign the contract in the first place, due to her status as a minor.

• Fraud: If one party of a contract uses false statements or threats to coerce the other party into entering into the contract, then the contract would not be considered enforceable under the law.

• The contract is unconscionable: A contract which is grossly unfair to one party is considered unconscionable. This happens when one party has much more bargaining power than the other and uses that power to force unfair conditions, clauses, or waivers onto the other party.

• Estoppel: This is when one party makes a statement that excuses the performance of the agreement, and the other party relies on that statement. For example, a bank telling a homeowner that they will not foreclose for six months in order to give the owner a chance to sell her home. The bank cannot then sue the homeowner in that given time for breach of contract since she relied upon their promise not to foreclose.

Under all circumstances, the nature of the contract, as well as the nature of the breach, will dictate the defenses.

Steve handles all disputes involving Contract Disputes, from all stages of litigation, including pre-trial orders, summary-disposition orders, jury, and non-jury trial judgments, and post-trial orders.

Steve represents businesses and individuals in lawsuits involving a variety of areas, including complex business and commercial litigation, arbitration, real estate disputes, employment law, probate litigation, and criminal defense.

If you have a Contract Dispute, you should contact Steve. He and his team can assess the facts of your case and help you determine the best course of action to move forward.

To schedule a discrete and confidential consultation about your matter, email or call Steve at (248) 963-6300.