In the world of commerce, companies frequently need the assistance of a business contract lawyer because a contract is broken, or ‘breached.’ If you have suffered losses because of someone’s breach of contract, you may be entitled to monetary damages and other valuable remedies, such as specific performance.
This post explains New York contract law and your options in enforcing a contract. So, too, this post discusses remedies that the New York state courts, or federal courts situated in New York, may grant to you because another party breached its contract with you.
Understanding Breach of Contract
A contract assigns, to each party, specific obligations. If a party does not fulfill these duties, there is a breach of contract. In New York, you have a valid cause of action for breach of contract if:
- You and the defendant entered into an enforceable contract;
- You performed your duties under the contract;
- The defendant failed to perform its duties, such as payment or delivery of goods or services; and
- This failure to perform damaged your business.
While these elements of a breach of contract claim may sound relatively simple, breach of contract cases typically require a detailed legal and factual analysis. Your business contract lawyer must confirm the contract’s enforceability, assess each party’s performance, and quantify your damages. Without the help of skilled counsel, you are likely to undervalue your claim, to incur unnecessary expenses, and to lose your breach of contract case.
For further discussion of the elements of a cause of action for breach of contract in New York, see here.
The Importance of Well-Drafted Contracts
Before you can determine whether a breach occurred, you must have a clear understanding of the terms and conditions of the involved contract. While some contracts are written in plain language and are easy to comprehend, many contracts include vague, technical, or even contradictory language. Too frequently, a breach of contract occurs because the parties have differing interpretations of the agreement’s requirements.
It’s crucial to draft and negotiate contracts which are readily understood. Well-written agreements give rise to fewer disputes.
So, too, a properly drafted agreement should set forth well-delineated procedures for resolving contract disputes, and should specify the forum in which a non-breaching party may seek relief. In addition, it may be advisable for a contract to specify the damages recoverable for a contractual breach. Such dispute resolution, choice of forum, and liquidated damages provisions reduce the time, expense, uncertainty, and public scrutiny which litigation entails.
Most business owners cannot draft or interpret, on their own, comprehensive and binding contracts and agreements. A business contract lawyer will explain New York contract law to you, and will structure your agreements to meet your goals.
Additionally, a contract disputes lawyer can help you understand and evaluate your legal options should a breach occur. For example, a contract may require, before you bring a lawsuit for breach of the contract, that you take part in alternative dispute resolution. So, too, the contract may preclude a non-breaching party from recovering certain types of consequential damages, such as lost profits or lost goodwill. By becoming familiar with the terms of your contract, you can better draw up your demands to a breaching party, and you can better formulate your strategies to enforce the contract.
Alternative Dispute Resolution
Not all breaches of contract require or allow litigation. Instead, some agreements explicitly require arbitration or another form of alternative dispute resolution (“ADR”). ADR processes, such as mediation and arbitration, can be powerful tools for resolving your contract disputes.
- Mediation: The parties select a mediator, who is a neutral non-party to the contract. At mediation sessions, the mediator listens to each side’s contentions and facilitates the parties’ settlement negotiations. The mediator may convey, to the other party, each party’s settlement demands or settlement offers.
Further, the mediator may offer his or her view of the strengths and weaknesses of each party’s position. However, the mediator cannot, without the parties’ consent, impose a settlement upon the parties.
- Arbitration: The parties select an arbitrator, or a panel of arbitrators. The parties engage in limited discovery. Then, at a trial-type hearing, the parties examine and cross-examine witnesses, offer documents into evidence, and give opening and closing statements. However, this evidentiary hearing is somewhat shorter than, and is less formal than, a trial in a court of law. Further, the arbitrator, not a jury, serves as the finder of fact.
After the parties have presented their cases, the arbitrator decides whether there was a breach of contract and, if so, awards damages to the claimant. Either party may apply to a court of law to confirm, vacate, or modify the arbitration award. However, because the grounds for vacating or modifying an arbitration award are much narrower than the grounds for overturning a court’s judgment, courts confirm most arbitration awards.
Mediations are confidential. Likewise, arbitrations, except sometimes for the arbitration awards themselves, are confidential.
It’s possible to resolve many contract disputes outside of court using these ADR processes. Moreover, because ADR is private and relatively quick, you can, through ADR, reduce your legal fees, avoid the uncertainty of a jury verdict, and sidestep negative publicity.
Breach of Contract Lawsuits
If pre-lawsuit negotiations and alternative dispute resolution fail to resolve a contract dispute, a New York contract lawyer can help you enforce your legal rights. Your business contract lawyer will draft, file, and serve a complaint, and will prosecute your lawsuit seeking enforcement of the contract or money damages.
In New York, an award of money damages is the relief most frequently granted for breach of contract. That is, the court requires the breaching party to pay money to the non-breaching party. The categories of money damages for violation of an agreement include the following:
Compensatory damages “place the nonbreaching party in as good a position as it would have been had the contract been performed.” Brushton-Moira Cent. School Dist. v. Fred H. Thomas Assocs., P.C., 91 N.Y.2d 256, 261, 692 N.E.2d 551, 669 N.Y.S.2d 520 (N.Y. 1998). This category of damages compensates you for the economic losses you suffer because of a breach of contract. Depending on the terms of your contract, compensatory damages can include both direct damages and consequential damages.
Punitive damages are damages on an increased scale, awarded to the injured business over and above what will barely compensate it for its property loss. In New York, punitive damages may not be recovered for mere breach of contract, even where the breach of contract was intentional. Rather, punitive damages may be recovered in a breach of contract action only where the breach involves fraudulent behavior “evincing a ‘high degree of moral turpitude’ and . . . ‘such wanton dishonesty as to imply a criminal indifference to civil obligations,’ ” and where “the conduct was ‘aimed at the public generally.’ ” Rocanova v. Equitable Life Assurance Soc’y, 83 N.Y.2d 603, 613, 634 N.E.2d 940, 612 N.Y.S.2d 339 (1994) (citation omitted).
Nominal damages are a trifling sum awarded to the non-breaching party where there is proof of breach of the contract, but where there is no substantial loss or injury to be compensated.
Liquidated damages are amounts which are fixed or stipulated by the parties in the agreement in the event of breach. Courts in New York will give effect to a liquidated damages provision if the amount liquidated ” ‘is a reasonable measure of the anticipated probable harm’ ” and the damages flowing from a breach are difficult to ascertain. See BDO Seidman v. Hirshberg, 93 N.Y.2d 382, 396, 712 N.E.2d 1220, 690 N.Y.S.2d 854 (N.Y. 1999) (citation omitted).
Specific performance is the remedy of requiring exact performance of an agreement in the specific form in which it was made, or according to the precise terms agreed upon. In New York, specific performance is available “where the amount of damages is difficult to ascertain, based on the unique nature of the subject matter of the contract or agreement or the lack of an established market value.” JMG Custom Homes, Inc. v. Ryan, 45 A.D.3d 1278, 1281, 844 N.Y.S.2d 817 (4th Dep’t 2007). By contrast, specific performance generally is not available “when money damages are sufficient to protect the interests” of the injured company. JMG Custom Homes, Inc., 45 A.D.3d at 1281.
Some money damages are relatively easy to compute. For example, if a business partner refuses to pay for goods and services that you delivered to him under a contract, your damages plainly include the price of these goods and services. However, many contracts limit the availability of consequential damages or other relatively uncertain damages. Without the services of a skilled business contract lawyer, you may lose valuable compensation.
New York contract law recognizes that, in some circumstances, lost profits are direct damages and are recoverable. To maximize your monetary recovery, you need a skilled and detail-oriented lawyer. Your contract disputes lawyer will help you ascertain, quantify, and prove your damages to the court or arbitrator. Further, your contract lawyer will work to heighten your monetary recovery, and will undertake to rebut any defenses or counterclaims which the breaching party raises.
Consult with a New York Business Contract Lawyer
In New York, prosecuting breach of contract claims requires excellent legal writing, skillful trial advocacy, meticulous preparation, and tenacious legal representation. The Law Offices of David S. Rich, LLC writes, negotiates, and compels performance of contracts which increase a company’s leverage in any scenario.
If your company needs a business contract or business agreement, contact the Law Offices of David S. Rich, LLC. Likewise, if your company wants to bring, or needs a lawyer to defend it in, breach of contract litigation, call New York City Contract Disputes Attorney David S. Rich at (347) 986-1114.