Defining Breach of Contract under New York Law
A breach of contract occurs when one party fails to uphold its end of the deal. In a legal sense, this means that something goes wrong with the deal or trade that prevents you from receiving what you agreed to get in return for something you gave up. When one party, in a contract between two or more individuals or businesses, does not uphold certain aspects of the contract, you may have a legal dispute on your hands. New York law provides that there are four elements to any claim dealing with breach of contract:
• The existence of a contract
• The plaintiff’s performance under the contract
• The breach of the contract by the defendant
• Damages to the plaintiff resulting from said breach
Even if not every term of the contract is met, there does not necessarily have to be a breach. For example, there are not "material breach" and "immaterial breach." If one party does not live up to his or her end of the deal, and it can legally be considered a breach, this is grounds for a lawsuit.
However, simply because some aspect of a trade was not performed by one party does not mean that the other party is automatically entitled to breach and can legally sue . Depending on what aspect of the contract is being argued over, the plaintiff may need to take the necessary steps to request a remedy, or give the defendant a chance to rectify the situation, before proceeding with the lawsuit. A situation where a plaintiff has not fully met certain aspects of the contract is known as "incomplete performance."
As a general rule of thumb, the further something pushes the plaintiff away from the expected and agreed-to outcome of the trade—financially or otherwise—the more likely it is to be seen as a material breach. The bar for proving a breach of contract is not high. The bar is so low, in fact, that even a minor technicality in the contract can theoretically be considered grounds for arguing a breach. Of course, there are always defenses that can be presented to fight the defendant’s claims, but when the contract provisions are on the plaintiff’s side, the case is supported by the statute and the damages can clearly be proved, the likelihood of the plaintiff winning the case and being awarded what he or she rightfully deserves is more than enough incentive to file the claim.
Types of Breaches of Contract in NY
In addition to the classifications above, New York law recognizes several subcategories of contracts that are an important consideration in determining what remedy or remedies may be sought. One category is termed "a material breach," which is, "a substantial failure of a material part of the contract or one that renders a contractual purpose impossible." McCulloh v. Velez, 2018 WL 5019672 (N.Y. Sup. Oct. 16, 2018). A material breach "goes to the essence of the contract," meaning that "the injured party is not bound to perform" under the contract, and may even cancel the contract if the breach is sufficiently serious. Id. To constitute a material breach, a breach must be sufficiently serious to undermine the entire contract. Legros v. Dardani, 116 A.D.2d 810, 811 (N.Y. App. Div. 1986). A "minor breach" is not a total breach. Minor breaches involve small departures from the terms of contract. However, when there are multiple minor breaches, they can be treated as a total breach. This is known as the "cumulative effect" of multiple minor breaches. A material breach is a unitary breach, while a minor breach (or multiple minor breaches) is a divisible breach. An "anticipatory breach" – also known as a "repudiation" – occurs before either party has performed under the contract, or when one party is about to breach, and can take place where one party indicates that it will not be able to fulfill its contractual obligations. A party anticipatorily breaches "when it makes it unequivocally clear that it will not perform by the contract’s due date." Id. "Anticipatory repudiation occurs . . . where one party repudiates the contract by making a statement to the other contracting party that it will not perform its contractual obligations. Such repudiation entitles the nonbreaching party to immediate performance by the breaching party." An-Gar v. Gengras Ford of New York, Inc., 122 F. Supp. 3d 219 (N.D.N.Y. 2015). An "actual breach" occurs when a party to the contract "fails to perform when performance is due and such failure is not excused." An-Gar, 122 F. Supp. 3d at 225. There are also anticipatory, constructive, and total breaches.
Common Disputes that Lead to Breaches of Contract
Contracts in New York are complex documents, so it should come as no surprise that the causes of contract breaches are equally complex. However, it is possible to take a closer look at some of the most common causes of contract breaches. These causes could include the following:
Breaches due to incapacity – sometimes, one or both parties violates the terms of a contract due to incapacity. In these cases, an individual may have actually lacked the capacity to bind themselves into a contract and, therefore, breaches it. An example of this would be when children enter contracts without their parents’ consent.
By accident – in some cases, an inadvertent breach of contract occurs by mistake or accident. For example, if an individual offers a product within a contract and within that contract sets a date for shipment, the individual might ship that product, but forget to contact the other individual to set up a time for delivery. This could result in a breach of contract.
Fraud or misrepresentation – let’s say that you buy a 3-bedroom house from a family, only to find out later that it really has only two bedrooms. You could sue them for breach since they had misrepresented the terms of the contract.
Duty or service not performed – in some cases, you could sue for breach of contract where the other party fails to perform their contractual duties or services. For example, a landscaper who does not show up at all to do the work they promised would essentially be breaching the contract.
Insufficient/Misleading disclosure – sometimes, parties may make poor disclosures to you regarding their finances. For example, suppose that the other party offers you a financial statement, which appears to be in good order. However, upon close examination you discover that it is not. In this type of situation, you would possibly have claims for breach of contract.
Remedies for Breaching a Contract
Contract law provides a number of legal remedies for parties to pursue in the event of a breach. The four most common types of contract remedies are: (1) damages; (2) specific performance, and (3) rescission. As an aggrieved party, seeking one or more of these remedies may help you achieve some resolution of the contract dispute.
Damages
Damages are monetary awards imposed by a court as compensation for a party’s economic losses resulting from a breach of contract. Under New York law, the measure of damages is generally "the amount which will put the injured party in the position it would have occupied in had the contract been fully performed." McCornick & Co. v. Lexington Commercial Corp., 96 A.D.2d 681, 682 (3d Dep’t 1983). These damages may be awarded for reasonable out-of-pocket expenses incurred by the party in reliance upon the contract and other expenses incurred which were a foreseeable consequence of the breach. Travel Time, Inc. v. Universal Music & Video Distribution Corp., 747 N.Y.S.2d 796 (N.Y. App. Div. 2001). However, lost profits, lost past or future joint ventrure earnings, and consequential damages are not recoverable, unless the damages are within the contemplation of the parties at the time of the contract and may be proved with reasonable certainty. Channel Master Satellite Systems, Inc. v. JFD Electronics Corp., 4 N.Y.2d 364, 377 (N.Y. 1958); Nemeth v. Nemeth, 862 N.Y.S.2d 643, 644 (N.Y. App. Div. 2008). Similarly, damages that are speculative, that are not related to the contract, and that result from independent action, generally cannot be recovered. Nor are personal injury damages recoverable. See e.g. Marine Midland Bank, N.A. v. səniors.com Corp., 213 A.D.2d 961 (1995).
Specific Performance
A party may obtain monetary damages when a party’s breach of a contract results in economic harm to the other party. However, for certain types of contracts, a court may award "specific performance," which means that the breach of contract fails to affect the contractual relationship itself, and requires only that the content of the contract be fulfilled. For example, specific performance may be ordered in a contract for the sale of land or an apartment lease where the value of the land or apartment to the aggrieved party is unique and monetary damages cannot make that party whole. Similarly, specific performance may be an appropriate remedy in cases involving a contract for the sale of a rare item, such as a one-of-a-kind antique, where the aggrieved party could not find a sufficiently comparable item to make up for the loss. If a contract provision is sufficiently detailed and not vague, like a real estate contract, specific performance may apply in order to prevent the party who breached from arbitrarily avoiding contractual obligations. Vessel Owners’ Propeller-Ship Fixtures Association, Inc. v. Bernstein, 181 A.D.2d 398, 400 (N.Y. App. Div. 1992). A court will only grant specific performance when the party granted such a remedy cannot otherwise be made whole by monetary damages. Specific performance is an equitable, and discretionary, remedy. "The doctrine of entertaining and granting specific performance lies within the discretion of the Court, to be exercised in furtherance of justice, taking into consideration the whole circumstances of the case." Hitachi Displays, Ltd. v. Tatung Co., 69 A.D.3d 410, 411 (N.Y. 2010). Instead of seeking or in conjunction with specific performance, parties may be able to seek a monition to have the contract validated by a declaratory judgment.
Rescission
In addition to monetary damages or specific performance, an aggrieved party may also obtain rescission, or cancellation of the contract. This equitable remedy is only awarded when it would be inequitable to allow the breaching party to perform under the contract, and it is used to return the parties to the positions they enjoyed before they entered into the contract. See Simcuski v. Saeli, 44 N.Y.2d 442 (1978); Alco Gravure, 42 N.Y.2d at 216-217; Restatement (Second) of Contracts § 376. Rescission is justified only when a party has engaged in fraud, duress or undue influence, or has breached a condition of the contract which goes to the essence of the contract.
How to Bring a Breach of Contract Claim in NY
When you have decided that filing a breach of contract lawsuit is the best route for your situation, there are certain steps which your attorney will guide you through. The first step should be to evaluate your case and determine if there is a valid claim. Next, since all of the parties must be located within the state, you must determine if New York State courts have jurisdiction. Geographical location is not the only factor when determining jurisdiction, as long arm jurisdiction allows more flexibility for the court.
To file a claim, you or your lawyer must file a Summons and Complaint at the New York County Clerk’s Office. This can be accomplished in person, mailed, or electronically for certain cases. Included with your filing would be a Notice of Petition along with affidavits , if any. There are filing fees which are based on how much your claim will ask for. The court may waive these if you demonstrate an inability to pay. A Proof of Service is required to be filed with the court when the other party has been served. You must serve the other party with a copy of the Subpoena and other documents, which can be accomplished by personal or mailing service, or by publication in rare circumstances when neither of the other options apply.
The defendant has 20 days to respond to the suit, or 30 days if they have been served outside of NY State. You cannot file a breach of contract suit against a minor without the appointment of a guardian ad litem. Once the defendant has responded, court proceedings may commence and your attorney can file Motions or Amendments with the court and the other party.
Breach of Contact Defenses in NY
Individuals and businesses may employ a variety of defenses against a breach of contract claim in state or federal court in New York. One defense to a breach of contract claim is that you lack the capacity to enter into the contract, such as if you are underage. Also, if the other party used economic duress or fraud to have you sign the contract under duress then you may also not be in breach.
A party can defend against a claim for breach by stating that it was justified in its conduct. For example, if both parties were in breach the conduct would be justified under the contract or it would be unreasonable that a party was not allowed to cancel the deal. In addition, a party may argue that the contract did not include material terms, like price and quantity, or that they were not clear enough to be enforced.
Lastly, a party can defend against a breach by arguing that the contract was unconscionable. A contract is unconscionable if an unreasonable bargaining process led to an oppression result in the contract at issue. For example, if there is a highly uneven negotiation process that results in a highly one-sided contract that is so unreasonable that it shocks the conscious of the court.
Breach Claim Statute of Limitations
Statute of Limitations for Breach Claims in New York
In general, claims for breach of contract are short-term business relationships and the statute of limitations to commence an action for a breach of contract in New York is 6 years. See a review of the statute of limitations periods in New York for different types of claims here. For parties that are located in New York City or Long Island (i.e., Kings, Queens, New York, Bronx, Richmond, Nassau, Suffolk counties) the statute of limitations is 6 years as well. Pursuant to CPLR § 213(2), the statute of limitations for an oral contract or an agreement to be performed in one year or less, the statute of limitations is 6 years. However, it is important to note that an action based upon a written contract must be commenced within six years of the date of the default or breach, if such contract is silent as to when the same is to be performed.
Pursuant to CPLR § 206, the statute of limitations is tolled for a minor or incompetent until the minor or incompetent is no longer a minor or incompetent. Generally, the statute of limitations is tolled during the period of infancy or insanity, however, nothing is tolled during the time in which that person has legal capacity. See CPLR § 207 and C.P.L.R. § 208. As such, a plaintiff may not sue on a contract until the date he or she reaches the age of majority or is restored to competency after being declared to be insane. See CPLR § 210. Further, time may be extended for an insurance claim if the insured is still alive and not otherwise barred from recovering under the subject policy. See Insurance Law § 3420.
Hiring a Lawyer for Breach of Contract Cases
Choosing the right legal representation is important when you are bringing or defending against a breach of contract claim in New York. The ideal attorney should have substantial experience litigating breach of contract cases. If the attorney has not litigated many breach of contract cases, they may not be able to properly evaluate the case and give suitable recommendations. In some breach of contract cases , alternative dispute resolution is a better solution than litigation and the attorney should know when to recommend one of these options over litigation.
The ideal law firm will have extensive experience in a range of civil matters, including business litigation and construction litigation. The attorney should be able to analyze every aspect of your breach of contract case from the perspective of well-versed attorneys that litigate, arbitrate and negotiate cases similar to the one you are facing.
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