To prevail on a breach of contract claim you must be able to establish that a contract existed, that the other side breached the contract and that this breach caused your damages. This is pretty straight forward stuff. But what happens when the breaching party’s defense is that you, the aggrieved party, actually breached the contract first?
In Michigan, and elsewhere, it has long been the law that the party committing the first substantial contractual breach cannot sue for the other party’s failure to perform. This rule of law is important because contract litigation is often a slugfest with each side blaming the other when promises are broken.
When such claims arise it often is left to the judge or jury to sort out facts and to decide who breached first. This is not to say that every ding and dent is actionable. To the contrary, slight performance deviations may not amount to an actionable breach, and certainly may not amount to a substantial or material breach sufficient to amount to a defense.
So, how do you tell the difference, and how does the fact finder sort this out? With contract principles, of course. Recall that to prevail on a contract claim the moving party must prove a breach and resulting damages. If the moving party can plead sufficient facts to establish these elements, the defending party, nonetheless, may be able to show that the moving party failed to fulfill its own contractual promise and did so first.
To determine if the moving party’s claimed failure amounts to a “substantial or material” breach, the non-moving party must show that it did not obtain the benefit of the bargain that it reasonably expected to receive.
For example, assume a simple contract provided that Party A would build a patio deck for Party B using Brazilian mahogany and that the deck would comply with all applicable city ordinances. When the deck was completed, Party B refused to pay because Party A used African mahogany instead of Brazilian mahogany.
Party A sues Party B for breach of contract to recover payment for the deck. When defending Party A's claims, the substitution of materials without Party B”s consent might be deemed a contractual breach, but Party B may be hard pressed to show that the “breach” was substantial or material. However, if it also turned out that Party A, when building the deck, failed to obtain the city’s required permit, that failure may be deemed a substantial breach particularly if the city demands that the deck be removed.
Contract litigation is a bit like a thunderstorm; we have all seen them, they all have common elements, but each one is a bit unique. Thus, when a contract claim is filed, and when the “he breached first” defense is raised, take some solace in knowing that it’s still a contract case. Burdens may shift and proofs may change, but to settle the storm, someone still needs to prove a contract, a breach and resulting damages.
Matthew J. Boettcher is a partner in the firm’s Bloomfield Hills office and Co-Leader of Plunkett Cooney’s Commercial Litigation Practice Group. He concentrates his practice in the area of commercial litigation with ...
Add a comment
SubscribeRSS Plunkett Cooney LinkedIn Page Plunkett Cooney Twitter Page Plunkett Cooney Facebook Page
- Commercial Liability
- Business Risk Management
- Commercial Real Estate
- Commercial Loans
- Business Torts
- Real Estate Mortgages
- Commercial Leasing
- Fraud Activity
- Cyber Attack
- Risk Management
- Real Estate
- Mortgage Foreclosure
- Internet Law
- Tax Law
- Statute of Limitations
- Residential Liability
- Zoning and Planning
- Consumer Protection
- Non-compete Agreements
- Department of Education (DOE)
- Alternative Dispute Resolution (ADR)
- Fair Debt Collection Practices Act
- Fair Credit Reporting Act
- Unfair Competition
- Shareholder Liability
- Uniform Commercial Code (UCC)
- Redemption is Redemption is Redemption
- Rules of the Road for Contract Interpretation
- Minority Owner Oppression Claims, an Introduction
- Freedom to Contract Jeopardized When Fact Finder’s ‘Sense of Fairness’ Becomes Determinative
- Failure to Understand Terms of Personal Guarantee Agreements Will Likely Cost You
- Collateral Estoppel may Apply to Vacated Judgments Post-settlement
- “But he hit me First” Might Work With Mom, but not Necessarily for Defending Breach of Contract Claims
- E-Commerce Sales Tax Enforcement Finally Enters 21st Century
- Exceptions Complicate Res Judicata Doctrine’s Ability to Bar Additional Claims
- Promises to pay Another’s Debts Might fall Within Statute of Frauds; Then Again, Maybe not