The basics of a breach of contract

A common type of business litigation that occurs between parties is a breach of contract. Contracts are basic to much of the operation of business in North Dakota and they generally facilitate the smooth flow of commerce and services in the economy.

A contract has been said to "fix the future," meaning it allows two or more parties to plan for some future event. A landowner hires a contractor to construct a building on their property. A store contracts with a distributor to provide it with a year's supply of products. An employer hires a manager and ensures their availability by signing them to a 3-year contract.

A contract, however, may be broken, or "breached" by the non-performance of one of the parties. One party may refuse to do the work or supply to goods or they may refuse to pay for those goods or services.

In North Dakota, the courts have noted that "The elements of a prima facie case for breach of contract are: (1) the existence of a contract; (2) breach of the contract; and (3) damages which flow from the breach."

First, there must be a valid contract. Second, there must be some nonperformance, and third, there need to be some ascertainable damages. If any one of these elements of a breach of contract is not shown, then the case will fail.

In a basic contract, these elements may be easy to show. A written contract, describing the subject matter of the contract and the price agreed to, typically will suffice. However, in more complex business dealings, there may be disputes over the existence of a contract, what constitutes performance or whether there were any damages.

In addition, you and your attorneys need to discuss the "big picture" and decide if you would appeal, the total cost of the litigation and other potential costs such as damaging a business relationship and how the lawsuit may be viewed by others within the business community.

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