If you practice law long enough, you are bound to have a client that needs help with a contract issue. This entry covers all of the basics one needs to know about prosecuting and defending contract claims.
Managing Client Expectations and Recovering Fees:
When bringing contract actions, the first thing an attorney will need to do is manage client expectations. This entails communicating with the client on how much is owed, the industry customs, the strength of the claim, financial condition of the debtor, whether there is insurance, the costs, and the post judgment procedures.
Potential Plaintiffs in contractual actions need to be made aware of the recoverability of the fees the client pay the attorney. Under §38.001 of the Texas Civil Practice and Remedies Code,
“A person may recover reasonable attorney’s fees from an individual or corporation, in addition to the amount of a valid claim and costs, if the claim is for: (1) rendered services; (2) services rendered; (3) furnished material; (4) freight or express overcharges; (5) lost or damaged freight or express; (6) killed or injured stock; (7) a sworn account; or (8) an oral or written contract.”
To recover attorney fees under Tex. Civ. Prac. & Rem. Code §38.002, the Plaintiff has to be represented by an attorney, give 30 days notice before filing the lawsuit, and deliver the notice to an authorized agent of the Defendant.
Breach of Contract:
To prove breach of contract you first must show that there was a contract. A contract between the parties is formed through (1) an offer and acceptance in strict compliance with the terms of the offer; (2) a meeting of the minds; (3) each parties’ consent to the terms; and (4) execution and delivery of the contract with the intent to be mutual and binding. Copeland v. Alsobrook, 3 S.W.3d 598, 604 (Tex. App.-San Antonio 1999, pet. denied).
Once a contract has been shown, the plaintiff will need to prove breach. Breach of contract can be shown by (1) the existence of a valid contract; (2) performance or tendered performance by the plaintiff; (3) breach of the contract by the defendant; and (4) damages sustained by the plaintiff as a result of the breach. Valero Mktg. & Supply Co. v. Kalama Int’l Liab. Co., 51 S.W.3d 345, 351 (Tex. App. Houston 1st Dist. 2001).
Other Claims that Allow a Plaintiff to Recover Under the Contract:
Other than breach of contract, there are certain claims that will allow a Plaintiff to recover on a valid contract. For example, a Plaintiff can claim tortuous interference with the contract by stating that there was a willful and intentional act of interference by a third-party to the contract and this interference caused actual damages to the Plaintiff. Victoria Bank & Trust Co. v. Brady, 811 S.W.2d 931, 939 (Tex. 1991). “Money had and received” is another claim recognized in Texas. This is an equitable theory that allows a Plaintiff to recover money that in equity and good conscience belongs to the Plaintiff. It is an equitable doctrine applied to prevent unjust enrichment. Hunt v. Baldwin, 68 S.W.3d 117, 132 (Tex. App.-Houston [14th Dist.] 2001, no pet.).
Sometimes other claims arise out of a quasi-contract theory. For example, promissory estoppel may be utilized to enforce a promise when a Plaintiff justifiably and reasonably relies on the promise to his detriment, it was foreseeable that the Plaintiff would rely on the promise, and injustice can only be avoided by enforcement of the promise. Boy Scouts v. Responsive Terminal Sys., 790 S.W.2d 738, 742 (Tex. App.-Dallas 1990, writ denied).
The goal of contract damages is to put the non-breaching party in the same position that she would have been in had the contract been performed. The general formula is the market value of the promised performance less the consideration promised.
Bringing Deceptive Trade Practices Claims:
Plaintiff attorneys cannot seek exemplary damages in breach of contract actions. To circumvent this impediment, Plaintiff attorneys look for ways to apply the Deceptive Trade Practices Act (DTPA). The DTPA prevents “false, misleading, deceptive” trade practices in the conduct of trade or commerce. This does not apply, however, to personal injury claims. The elements to prove a DTPA claim are:
a. The Plaintiff was a consumer as defined in the DTPA;
b. The Defendant engaged in at least one of the false, misleading, or deceptive acts or practices listed in the DTPA;
c. The Plaintiff detrimentally relied on the false, misleading, or deceptive act or practice; and
d. The Defendant’s false, misleading, or deceptive act or practice was a producing cause of the Plaintiff’s injury.
Tex. Bus. & Comm. Code §§17.41 – 17.63. DTPA claims are popular because it allows Plaintiff attorneys to expand their damage model.
Defending Contract Actions:
When finding yourself on the defense side of a contract case, the first thing that an attorney needs to evaluate is the use of affirmative defenses. Below is a brief overview of some of the most common affirmative defenses. Keep in mind this list is not exhaustive.
1. Statute of frauds – This defense applies to, among other contracts, guaranty/surety contracts, real estate contracts, and leases for longer than one year. Tex. Bus. & Comm. Code §26.01. The defense will need to prove that the contract was not in writing, and if it was in writing, it was not signed by the person charged with the obligation.
2. Waiver – The affirmative defense of waiver arises when the Plaintiff has intentionally relinquished a known right or has engaged in conduct that is inconsistent with claiming a known right. Ulico Cas. Co. v. Allied pilots Ass’n, 262 S.W.3d 773, 778 (Tex. 2008).
3. Election – A party entitled to two remedies (law or equity) must elect whether to stand on the contract and recover damages or repudiate the contract and seek restitution. Dallas Farm machinery Company v. Reaves, 307 S.W.2d 233, 238-2398 (Tex. 1957).
4. Ambiguity of damages – To recover lost profits for a breach of contract, the amount of the loss must be shown by competent evidence with reasonable certainty. Helena Chem. Co. v. Wilkins, 47 S.W.3d 486, 505 (Tex. 2001).
Contract actions should not be something a personal injury defense attorney should shy away from. By understanding how to defend and prosecute these claims, you can provide expanded service and assistance to a greater client base.