As a business, entering into contracts with customers, clients or other businesses is simply the way of life. Among many other details, it helps memorialize the terms of the deal, spells out what services will be performed or what goods will be delivered, and outlines how long the contract should remain in place.
Legal agreements lay the foundation for businesses to bring in revenue and, when drafted well, they help mitigate risk. But what happens when one party to the agreement fails to hold up their end of the deal?
This article provides you answers to your most important questions about breach of contract in Arizona.
What is a breach of contract?
A breach of contract occurs when one or both parties violates or fails to perform any of the agreed-upon terms and conditions contained in the agreement. There are four types of breach of contract:
1. Material breach of contract
2. Partial breach of contract
3. Anticipatory breach of contract
Material Breach of Contract
A material breach of contract occurs when a party to the contract fails to perform what is considered the “essence” of the contract. Often referred to as a total breach of contract, such a breach is so significant that it defeats the underlying purpose of the contract. For example, if a company entered into an agreement with a manufacturer to have its widgets built and paid a down-payment to have manufacturing commence, but then the manufacturing company fails to produce a single widget, this would constitute a material breach of contract.
Partial Breach of Contract
A partial breach of contract, or immaterial breach, occurs when one party to the contract fails to perform a contract term or condition that is less critical to the underlying purpose of the agreement. A partial breach of contract
Anticipatory Breach of Contract
An anticipatory breach of contract occurs when a party declares they do not intend to perform or fulfill an obligation of the contract. It simply means that a party makes know that it intends to breach the terms of the agreement. For example, if an architect took actions or failed to take the necessary actions for a real estate developer to meet deadlines, this would constitute an anticipatory breach of contract.
What constitutes a valid contract in Arizona?
In Arizona, a valid legal contract requires three fundamental parts:
The Arizona Revised Statutes (A.R.S.) Section 470-2206 stipulates that an offer to make a contract can be made by any reasonable method that invites acceptance by the other party. This means that an offer can be made verbally or in writing and in any form that invites acceptance such as a quote, formal legal agreement, and perhaps even an email depending on the circumstances.
In Arizona, similar to the making of an offer, acceptance can be made in many forms. In instances where a verbal offer is made, it would naturally make sense that you may verbally accept that offer. In the most traditional sense, your legal signature consistutes acceptance; however, the A.R.S. provides examples of when acceptance is more nuanced, such as prompt shipment of goods when the agreement is an offer to purchase good on a prompt-basis.
Consideration is the value bargained for between the parties. In other words, the value exchanged for the promise to be fulfilled. An easy example is the money a homeowner pays to a lawn care company to fulfill the promise of mowing the property owner’s yard when the grass becomes overgrown. While the exchange of money is obvious, consideration can also be goods or services and consideration can be nominal (i.e., $1).
What are the Arizona breach of contract elements?
First and foremost, for a breach of contract in Arizona, you must prove that a valid contract exists. As mentioned above, a valid contract requires an (1) offer, (2) acceptance of that offer, and (3) consideration given in exchange for the promise.
If a valid contract exists, you must prove both that you performed your obligations and that the other party failed to perform theirs.
Finally, you must be able to prove you sustained damages caused by the other party’s non-performance of their obligations. For a more detailed description about the types of damages jump to the bottom of this article.
What constitutes provider breach of contract in the state of Arizona for procurement?
Most importantly, whether a provider has breached its contract with the U.S. Government depends on the terms contained within the agreement and whether the elements of a breach of contract can be proven — just like a breach of contract between two private parties. Oftentimes, the government contract contains key provisions that allow the government to unilaterally terminate the agreement and/or buy the goods from an independent source.
What if the government has breached the contract is has with a private contractor?
The Contract Disputes Act of 1978 (CDA) applies to almost all contracts between the U.S. government and private contractors including procurements of services, construction, remodel and repair of real estate, disposal of property, and procurement of property.
If you’re a government supplier or service provider, the CDA requires private contractors to follow very specific steps related to breach of government contract claims. Namely, the contracting officer is the first line of contact for an aggrieved party — whether that’s the private contractor or the government agency.
Only after the contracting officer makes his or her decision can the private contractor escalate its claim to file a suit (in the event they are displeased with the contracting officer’s decision.
Can you sue for breach of contract?
It depends. The contract may contain specific language that requires the parties to participate in alternative dispute resolution either first, before a breach of contract suit is initiated, or in lieu of litigation altogether. Sometimes the contract outright prohibits the resolution of a breach of contract dispute in any other fashion other than arbitration.
Even if the Agreement does not prohibit commencing suit for a breach of contract, it is typically more cost-effective to participate in mediation or arbitration than it is to take your dispute through the litigation process, and, oftentimes, parties are more satisfied with the way the dispute has been resolved.
Are you looking to resolve a dispute without going to court? Talk to an attorney today.
What are the statute of limitations for a breach of an oral contract in Arizona?
While oral contracts are permitted in Arizona, A.R.S. Section 44-101 sets forth the type of agreements that must be put into writing.
For example, A.R.S. section 44-101 requires any agreement that cannot be performed within one year to be put into written form. Other examples include the sale of goods in excess of $500, leases for longer than one year, agreements authorizing an agent or broker to purchase or sell real property, and contracts to loan money or grant or extend credit in an amount greater than $250,000 for a business purpose. For the full list of contracts that must be put into writing, you can look at the full text of A.R.S. Section 44-101 here.
The statute of limitations for a breach of an oral contract in Arizona is three years (A.R.S. Section 12-543).
When does statute of limitations start for breach of contract in Arizona?
The statute of limitations for breach of contract in Arizona largely depends on the type of agreement, but, generally speaking, the statute of limitations for breach of contract in writing (for debt) is six years (A.R.S. Section 12-548). With that said, there are many instances and exceptions to this rule and the specific circumstances of your situation will ultimately determine the specific statute of limitations.
What are the Arizona damages for breach of contract?
Regardless of whether you elect to participate in alternative dispute resolution or not, the following are the different types of damages that can be claimed due to a breach of contract:
1. Compensatory damages.
These are damages awarded to compensate you for damages, injury or another incurred loss.
2. Consequential damages.
These are damages that can be proven to have occurred due to one party’s failure to perform its contractual obligations
3. Incidental damages.
These are damages the non-breaching party incurs to avoid direct or consequential losses due to the breaching party’s actions.
4. Liquidated damages.
These are damages agreed upon in advance, typically in the terms of the agreement, usually outlined as a specific sum to be paid by the breaching party.
5. Nominal damages.
These are damages that are nominal (i.e., a small, inconsequential sum of money) awarded in instances where the non-breaching party has not proven any loss or harm in order to be granted compensatory damages.
6. Punitive damages.
These are damages awarded at the court’s discretion to serve as a form of punishment for especially harmful behavior.
Looking for an Arizona Breach of Contract Attorney?
Attorney Paloma Goggins is an experienced breach of contract attorney in Arizona that works with her clients to understand the terms of the agreement and amicably resolve the dispute with the opposing party. Call us or send us a message to learn how Nocturnal Legal can help you today.