Breach of Contract
When two parties sign a contract, each expects the other to perform its contractual obligations. Unfortunately, this does not always occur. Contractual breaches can arise from disputes over the meaning of contractual terms, from unexpected circumstances that affect a party’s ability to perform or from a party simply refusing to live up to its contractual obligations. Whatever the case may be, contractual breaches can amount to substantial losses for the non-breaching party. A Chicago breach of contract attorney from the Clinton Law Firm can aggressively advocate on behalf of a wronged business to help it get just restitution or compensation.Issues in a Breach of Contract Suit
Determining when a party is in breach is not always straightforward, especially when contract terms are vague or subjective. Moreover, breaching parties may have numerous defenses in a typical breach of contract suit. But each Chicago breach of contract lawyer at the Clinton Firm has the litigation experience necessary to recover on or defend against contract claims, including claims arising under the Illinois version of the Uniform Commercial Code. Our attorneys have successfully prosecuted and collected on cases involving the sale of goods where the opposing party failed to pay for the products that it either resold or used in its business. In addition, our breach of contract attorneys in Chicago have obtained favorable outcomes defending computer software companies against claims alleging defective software.
The first issue is whether there was a contract or agreement between the parties.
A contract is an agreement between two parties for valid consideration. When we think of a contract, we imagine a written document signed by both parties. In the modern world, sometimes you can agree to a contract by clicking a button that says “I agree” on a computer screen.
- Here we are going to discuss an old case, ProCD v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996) where the Seventh Circuit held that a license agreement on shrink-wrap was valid binding and enforceable. The customer had the opportunity to read the license and decline to buy the product.
- Move forward a few years … Now no one uses shrink-wrap. Instead, you have to click on the license before you use the software. If you don’t click you do not get to use the product. If you do click “I agree” you have agreed to use the software subject to the terms of the software’s publisher. Those terms can include a forum clause (where the litigation will occur) or an arbitration clause (the case will be resolved by an arbitrator, not a judge or jury). It is important to read, or at least keep a copy of, anything you click on.
A breach of contract occurs when a party fails to perform under the terms of the contract. This can cause the non-breaching party significant damages, including the costs of finding a substitute to fulfill the contract terms. The non-breaching party may have several options for recovery, including enforcing the contract on its terms, canceling the contract and suing for repayment of money expended, or suing for liquidated damages as specified in the contract.
In some cases, computing damages can be complicated. This is especially true when the non-breaching party suffers consequential damages — such as losing a contract with a third party because the goods received from the breaching party were late or defective. A Chicago commercial litigation attorney must often rely upon expert reports or other reliable sources to prove such damages. We have decades of experience litigating contract issues.
- In limited circumstances, a plaintiff may recover consequential damages in a breach of contract case. Consequential and special damages are damages that are “the consequence of special or unusual circumstances which are in the reasonable contemplation of the parties when making the contract.” See Hanumadass v. Coffield, Ungaretti & Harris, 311 Ill. App. 3d 94, 724 N.E.2d 14, 18 (1st Dist. 1999). Consequential damages are difficult to recover and many commercially sophisticated parties will include a waiver of consequential damages in their written contracts and sales materials.
We have experience in litigating breach of contract cases for defendants. There are two approaches to defending a breach of contract claim: (a) establish that there was no breach of contract; (b) argue that the statute of limitations has expired; or (c) challenge the plaintiff’s damage claim on the ground that the breach of contract did not cause the plaintiff’s damages.Understanding the Economic Loss Doctrine
This is a simplification, but there are essentially two main areas of litigation: (a) contract; and (b) tort. A tort claim is a wrongful act or an infringement of a right (other than a breach of contract) leading to damages. A party who enters into a contract always has the option to breach the contract and pay damages to the other party. It is permitted for a party to a contract to breach and pay damages rather than complying with a contract.
In the 1960’s courts around the United States became concerned that tort liability claims could swallow up contract law. The Illinois Courts developed the Economic Loss doctrine, which prohibits a plaintiff from recovering in tort for purely economic losses. There are exceptions to the doctrine, but it is designed to require a party who suffers an economic loss to file a claim for breach of contract or breach of warranty.
In 1982, the Illinois Supreme Court decided the case of Moorman Manufacturing Co. v. National Tank Co., 91 Ill. 2d 69 (1982), which recognized the economic loss doctrine. As the Illinois courts have explained, “[t]he rationale behind the Moorman doctrine is that tort law provides a remedy for losses from personal injuries or property damage, and contract law and the Uniform Commercial Code (UCC) provide remedies for economic losses resulting from diminished commercial expectations without personal injury or property damage. See Moorman, 91 Ill. 2d at 88; see also In re Illinois Bell Switching Station Litigation, 161 Ill. 2d 233, 241 (1994). (quotation from Hecktman v. Pacific Indemnity Company, 59 N.E.2d 858 (Ill. App. 2016).
If you have a business dispute, make sure that you have considered the impact of the economic loss doctrine before you file your case. We can help you with these legal issues.
The attorneys of the Clinton Law Firm boast over 50 years of combined experience in contract litigation matters. Our Chicago commercial real estate disputes attorneys and commercial litigation lawyers have represented businesses of all types and sizes throughout Illinois. To schedule a consultation and discuss your case with a knowledgeable Chicago business law attorney, call us at 312.357.1515 or contact us online today.