By definition, a contract is a legal obligation for each relevant party to fulfill the terms of agreement. It provides structure for many business deals, and typically it is beneficial for everyone involved.
Each contract in Arizona must include an offer, an acceptance and a consideration (value of money, time, etc.), and can be written or verbal. The Statute of Frauds. A.R.S. §44-101 outlines the types of contracts that must be in writing to be legally enforceable. Furthermore, only legal adults who are not mentally incapacitated or impaired by drugs or alcohol can enter into a contract.
There are many laws surrounding creations of contracts in Arizona, but residents should be aware of what happens if a party does not hold up their end of the deal. This is what you need to know about Arizona breach of contract laws, some common examples and breach of contract remedies if a party breaches a contract.
What is a Breach of Contract in Arizona?
At the highest level, a business contract details the obligations that are to be fulfilled by the parties who entered into the agreement. Legally, a breach of contract occurs when any party involved fails to fulfill part or all of the set contractual obligations.
There are three types of breach of contract in Arizona:
- Material: One party does not fulfill their part of the contract
- Partial: One party does not fulfill part of the contract (but can fulfill the rest of it)
- Anticipatory: One party forecasts the other’s inability to fulfill their part of the contract
Whether in whole or in part, a breach of contract refers to any deviation from the legal agreement and always has the following components.
Components of a Breached Contract
To prove a breach of contract, you will want to show at least four things:
- Validity of contract entered into by someone legally allowed to do so and in writing, if required.
- Reasonable effort made by the party claiming a breach to fulfill their part of the contract, even in the face of resistance or difficulty from the defendant.
- Failure of defendant to fulfill obligations as outlined by the contract.
- Losses suffered by the party claiming breach because of the breach of contract.
The more elements you can show to prove there was a breach of contract, the easier it will be to prove your case.
What to do when a Contract has been Breached
When a breach of contract occurs or is alleged, the parties involved can choose between enforcing the contract or resolving the losses suffered due to the (alleged) breach.
The parties can first attempt to achieve an informal resolution, but if the dispute over their contract continues, the most common next step is a lawsuit. If the losses suffered are monetary and below $3,500, the parties may be able to resolve the issue in small claims court or justice court.
People and businesses involved in contract disputes do not necessarily have to involve courts or draft formal lawsuits. The parties can agree to pursue mediation or binding arbitration, which are both options that keep the case out of court.
Remedies for Breach of Contract
When one party breaches a contract, the other is entitled to a remedy under the law. A breach of contract is typically remedied through one of the following: damages, specific performance and/or cancellation.
Damages are the most common remedies for breach of a contract and span a few different types. Compensatory damages put the party with losses back in the position they were in before the breach occurred. Punitive damages – designed to punish the defendant – are generally not recoverable in a breach of contract action unless there is evidence that the wrongdoer engaged in particularly malicious conduct. Liquidated damages may be recoverable if the contract provides for them.
Specific performance is best described as the breaching party’s court-ordered fulfillment of the original contract and is the remedy chosen in unique situations where damages will not suffice. A particular situation warranting specific performance is the purchase of real estate – as real estate is considered legally unique.
Cancellation and rescission is the remedy that describes when the non-breaching party is put back in the position it was in prior to the breach, and, the contract is voided/cancelled. This relieves all parties of their obligations while also making amends.
How to Handle Breach of Contract in Arizona
When the other party in your contract hasn’t fulfilled their obligations, start by determining the facts. If the contract was written, keep a copy on hand for reference. If it was verbal, try to find a record of the agreement. Your attorney will need to verify that a valid contract existed, that it was broken, that there were damages of some sort and that the breaching party was responsible for them.
You can then reach out to the party that breached the contract to try an out-of-court alternative resolution option. If there is a delay after the initial phone call or face-to-face conversation, follow-up with a written request and then involve the highest authority in the other party’s realm, if applicable.
It is wise to seek legal counsel whether or not you anticipate a lawsuit, as an attorney will be well versed in the process of breach of contract and will help you recover losses suffered.
Find an Experienced Real Estate Attorney
The attorneys at MacQueen & Gottlieb can provide diligent contract review for all your current agreements and can recover losses caused by breach of contract. Our firm has extensive experience with all types of contracts in Arizona. Contact us today at 602-726-2229 to schedule an initial consultation or make an appointment online.