7 Breach of Contract
A. Definition
A breach of contract is a failure to perform a contractual promise without legal excuse.1The action is one at law,2 predicated on the existence of a contract.3 Where there is doubt whether an action is pled in contract or tort, it is generally resolved in favor of regarding the action as one in contract.4
B. Elements
To recover for a breach of contract the plaintiff must allege and prove:
(1) a binding contract entered into by the parties
(2) breach or unjustifiable failure to perform the contract
(3) damage suffered by the plaintiff as a direct and proximate result of the breach.5
C. Elements Defined
1. A Binding Contract Entered into by the Parties
A binding, valid contract must exist for there to be a cause of action for breach of contract.6 The plaintiff must therefore allege and prove each material element of the contract sued on.7
A contract is an obligation which arises from actual agreement of the parties manifested by words, oral or written, or by conduct.8
The elements of a contract are offer, acceptance,9 and valuable consideration.10
There can be no offer of a contract by a person who lacks authority to create a contract.11
An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.12
Compliance in full with the terms and conditions of the offer constitutes acceptance.13Substantial compliance with the terms of the offer is required to make a contract enforceable.14 Conduct manifesting assent constitutes acceptance and acceptance may be inferred from conduct. 15
Consideration is a vital element of a binding contract and no contract is complete without valid, legal consideration.16 "Valuable consideration may consist of some right, interest, profit, or benefit accruing to one party or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other."17 A release from a legal contract was sufficient consideration for a promise to furnish support.18 Consideration could also be found in detrimental reliance on an insurance agent's assurance that he was procuring insurance coverage for the plaintiff's son.19
2. Breach or Unjustifiable Failure to Perform the Contract
A contract may give a right to demand performance, but no cause of action arises until a party refuses or neglects to perform some duty required by the terms of the contract.20 The first party to breach bears the liability for his or her nonperformance.21 A complaint which alleges no breach of contractual duty fails to state a cause of action.22 The defendant is entitled to reasonable notice in the complaint of the matters which it is alleged constituted the breach,23 but a complaint is sufficiently definite if it sets out the alleged breach with enough particularity as to enable the defendant to answer and prepare a defense.24
A party can generally not claim a breach by the other when its own acts prevent that other party from performing.25
3. Damage Suffered by the Plaintiff as a Direct and Proximate Result of the Breach
The plaintiff bears the burden of proving damages resulting from the breach.26
D. Defenses27
Defenses to an action for breach of contract include the statute of limitations, fraud, minority of the defendant at the time of contracting, contravention of public policy or illegality, impossibility of performance, lack of contractual capacity,28 and duress.
The statute of limitations applicable to actions on a "contract, obligation, or liability, express or implied" is three years for actions arising on or after April 5, 1988, and six years for those arising before that date.29
An oral contract may be defeated by the Statute of Frauds which requires a writing.30
Where contract is procured by fraud, there can be no cause of action for breach because there is no valid contract. 31
A minor may disaffirm a contract as a whole, but may not affirm beneficial terms and disavow burdensome ones.32
Courts will not enforce a contract which violates public policy, statutory law, or constitutional provisions.33 When, for example, a contract deprives a governing body, or its successor, of a discretion that public policy demands should be left unimpaired, the contract is void. 34 Thus, a contract which contravenes public policy is void and cannot be the basis of an action for breach.35 Similarly, courts will not enforce an illegal transaction, although an independent contract not forbidden by law is enforceable despite the fact it is connected to proceeds of an illegal transaction.36
A party to a contract is excuse from performance which is rendered impossible by an act of God, the law, or by a third party. The party claiming impossibility bears the burden of proving it as a defense, and impossibility must be real, not mere inconvenience.37
A contract may be voidable where formed under duress since duress removes the quality of mind essential to the formation of a contract.38
An employee who continues to work under a contract may be estopped from asserting a breach of that contract.39
E. Remedies
Damages in a breach of contract action are to place the nonbreaching party in the position he or she would have been had there been no breach and the contract was performed.40 The parties to a contract may stipulate an amount of liquidated damages owed in event of a breach, however, if a court finds the stipulation is a penalty, it will not be enforced. 41 The proper measure of compensation is the loss actually incurred as the result of the breach.42 Special or consequential damages may be recovered if they either flow as a natural consequence of the breach or have been reasonably within the contemplation of the parties at the time of the contract.43 Lost profits, for example, frequently at issue in breaches of commercial contracts, are recoverable.44
The estimate of lost profits must, however, not be based wholly on speculation and conjecture.45 There must be "a certain standard or fixed method by which the loss may be estimated with a fair degree of accuracy."46 The same standards apply to lost profits sought by new businesses or enterprises.47 Rescission may be granted when there is a breach of contract, but generally, the breach must be so fundamental and substantial that it defeats the purpose of the contract.48 The South Carolina Supreme Court has said that real estate contracts are unique and courts should evaluate their purpose and the materiality of a breach in light of the differences between them and other contracts. Thus, when a buyer withheld $2,000 from a purchase price of $550,000 and the seller alleged that withholding of those proceeds was a material breach, the allegations supported a claim for relief and it was error for the trial court to grant the buyer's motion to dismiss the remedy of rescission. The court acknowledged that the amount withheld was relatively small, but said it was error to focus on the dollar amount withheld because, when proceeds from the purchase price were withheld, the transaction was not final and the purpose of the contract was potentially defeated.49
A court may order specific performance of a contract, a remedy that lies in equity,50however it should be granted only if there is no adequate remedy at law.51
STATE OF SOUTH CAROLINA COUNTY OF __________ Plaintiff,
vs.
__________ Defendant
IN THE COURT OF COMMON PLEAS
Civil Action No. __________
COMPLAINT
(Breach of Contract)
(Bad Faith Refusal To Pay Insurance Claim)
(Jury Trial Demanded)
The Plaintiffs, herein, complaining of the Defendants, would respectfully show unto this Honorable Court:
1. Plaintiff, __________ is a citizen and resident of __________ County, State of South Carolina.
2. Plaintiff, __________ is a corporation organized and existing under the laws of the State of South Carolina and does business in __________ County, South Carolina through its agents, servants and/or employees.
3. That Plaintiffs are informed and believe that Defendant, __________ (hereinafter also __________ Insurance), is a corporation organized and existing under the laws of a state other than South Carolina and does business in the State of South Carolina, County of __________, through its agents, servants and/or employees.
4. That Plaintiffs are informed and believe that Defendant, __________, is a citizen and resident of __________ County, South Carolina.
5. That, at all times hereinafter mentioned, Defendant, __________, through their agents, servants and/or employees sold Plaintiffs a (type) insurance policy effective __________ through __________ and designated as policy number __________ providing certain (type) insurance coverage on Plaintiffs' (description of insured interest).
6. That, at all times hereinafter mentioned, Plaintiffs have paid all insurance premiums when due defendants, __________.
7. That Defendants, __________ agreed to cover loss to (description of insured interest).
8. That on __________, Plaintiffs' (description of insured interest), which were insured by defendants, __________, sustained substantial damage as a result of (type of loss).
9. That Plaintiffs' (description of insured interest) were so severely damaged that (description of any special damages flowing from loss).
10. That, at all times hereinafter mentioned, Defendant, __________, was acting as an agent for defendants, __________, for the purpose of investigating, evaluating, reporting and adjusting Plaintiffs' claim for losses due to (type and date of loss).
11. That, at all times hereinafter mentioned, Defendants, __________, through its agents, servants and employees sold Plaintiffs its (type) insurance number (policy number) in (city), South Carolina and said Defendants were doing business in __________ County, South Carolina and owned contractual property rights in said County and State.
12. That, at all times hereinafter...
