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Avoiding Costly Breach of Contract Lawsuits

| Feb 8, 2014 | Breach of Contract

One of the most common types of business disputes that Buffington Law Firm’s business trial attorneys handle are lawsuits involving an alleged breach of a written contract between two businesses or individuals.  These lawsuits have one feature that other types of lawsuits often lack: an actual written agreement the text of which, at least, is usually not in dispute.

You may also want to refer to our articles: “Common Pitfalls of Contracts” and “Business Litigation and commercial Lawsuits”

Unfortunately, contracts are sometimes drafted by people, often non-litigation attorneys, who know little or nothing about business litigation and who, in fact, fear litigation.  Contracts drafted by these people often have certain components that greatly increase the cost and danger of a lawsuit should one occur.  For example:

  • Punitive Attorney’s Fee Provisions.  Buffington Law Firm’s business trial attorneys recently tried a multi-million dollar breach of contract case where the contract between the parties had a “poison pill” attorney’s fee provision.  This provision provided, in essence, that no matter how small the verdict might be in favor of a prevailing party in a lawsuit involving this contract, the winning side was entitled to all of its attorney’s fees, expert fees, and incidental costs without limitation.  The effect of this rather amazing piece of legal draftsmanship was that it made the lawsuit far more dangerous for all concerned than it would otherwise have been.  Little or no thought had gone into the decision to insert this provision into the contract, but the result was that this unwise clause became the central issue in the lawsuit.  This could easily have been avoided by having a litigation attorney participate in the negotiation or review of the contract.  
  • Unrealistic Contract Provisions.  Businesses that enter into contracts typically do so with good intentions.  Unfortunately, this sometimes causes people to make contracts overly specific in a way that is unreasonably demanding upon one or both parties.  A contract may specify detailed accounting or other provisions that are, in fact, “aspirational” i.e. something that the parties will try to accomplish.  Avoid these types of contract requirements.  If the deal goes south, the other side will pounce on situations in which the defendant did its best but simply could not have reasonably accomplished all of the wonderful things that the contract specifies.  Keep contractual requirements realistic.

The fact that most breach of contract lawsuits derive from a written contract is critical.  In our experience almost nothing is more persuasive in a trial than “the written word.”  Testimony about what people said often differs, but what the contract says seems clearer to juries (and sometimes judges) than it actually was or is. This often means that the court or jury will simply read the contract and decide whether there was a breach based simply on whether the defendant did what the contract seems to say.  The notion is that the provision was agreed to in the contract, thus the defendant was supposed to do it.  It is not easy for defendants to explain that the provision seemed like a good idea at the time, but in practice (as is very often the case) it simply was not workable.  It is therefore important to ensure that if you or your business enters into a contract, what you are required to do is clear, doable, and realistic.  We recently concluded a case with these sorts of problems to a successful outcome, but it was frustratingly obvious that a little planning and a thoughtful review of the contract could have avoided a very expensive lawsuit.

Buffington Law Firm’s business trial lawyers are experienced breach of contract litigators.  If you have a breach of contract lawsuit that you would like to discuss, we invite you to speak directly with one of our experienced business attorneys in a free legal consultation.

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