Contracts Law

To establish a breach of contract, one must prove “(1) there was a contract, (2) the other party breached the contract, and (3) the breach resulted in damages to the party claiming breach.” Bank of America, NA v First American Title Ins Co, 499 Mich 74, 100; 878 NW2d 816 (2016). The salient element is the second, when both parties alleging that the other breached the contract. “The rule in Michigan is that one who first breaches a contract cannot maintain an action against the other contracting party for his subsequent breach of failure to perform.” Michaels v Amway Corp, 206 Mich App 644, 650; 522 NW2d 703 (1994). “However, that rule only applies when the initial breach is substantial.” Id (emphasis added). “In determining whether a breach is material, the court should consider whether the non-breaching party obtained the benefit it reasonably expected to receive.” Omnicom of Mich v Giannetti Inv Co, 221 Mich App 341, 348; 561 NW2d 138 (1997).

No, a contract can be legally enforceable whether it is made in writing or it is an oral agreement. There are some exceptions however. Under the Statute of Frauds, certain agreements are not enforceable if they are not in writing. For example, agreements related to real estate that have a term exceeding one year must be in writing to be valid. Check with our attorneys to learn more about these exceptions.

Whether or not you will be held personally responsible under a contract will depend on the provisions in the contract. If you signed as a ‘personal guarantor’ for the company, you will be held accountable for the company’s obligations, but to what extent will depend upon how you negotiated your guaranty.

Even if you feel that you did not enter into an agreement, a court may find that you are bound by a contract pursuant to the legal doctrine of “promissory estoppel.” The court will determine if (1) a legal relationship either exists or is anticipated between the parties; (2) representations are given in circumstances that lead the other party to assume the promise will be performed; (3) reliance by the other party on the promise or representation to their own detriment; and (4) it would be unconscionable for the promisor to go back on their promise.

Unless the conduct of the other party was so outrageous, reckless, or malicious, it is highly unlikely that a court would award punitive or exemplary damages in a contract case. Compensatory damages are awarded instead. Courts most often award compensatory damages covering the actual loss the nonbreaching party incurred as a result of the breach of contract. Compensatory damages replace the loss caused by the breach.

An anticipatory breach occurs when a party demonstrates its intention to break a contract. However, vocal or written confirmation is not required, and failure to perform any obligation in a timely matter can result in a breach. An anticipatory breach ends the counterparty’s responsibility to perform its duties, however, the aggreived party claiming an anticipatory breach is legally obligated o make every effort to mitigate their own damages if they wish to seek damages in court.