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Breach of Contract Lawsuits. Avoid Aspirational Requirements

by | Dec 7, 2021 | Blog, Breach Of Contract, Business Litigation

Buffington Law Firm’s breach of contract attorneys often deal with breach of contract lawsuits in which, upon examination of the facts, it becomes obvious that the requirements that one or the other party committed to can at best be characterized as “aspirational.”  Put another way, the contract specifies a level of performance that the party in good faith “hoped” to do, i.e. if all goes well.  Or if all goes perfect.  So, hypothetically a party may commit to delivering 500 widgets per week.  The party fails to do this and the other party sues.  When the defendant retains counsel, his counsel obviously asks him how feasible it was to commit to 500 widgets per week. It comes to light that the defendant had never before managed to produce that many widgets in such time, but was hoping to do so based upon certain assumptions that did not come to pass.  There were supply chain difficulties.  There was labor turnover.  The contract, of course, made no provision for such contingencies.  What to do?

The point here is that if the other side sues you for nonperformance, it is not a defense that “the requirement of the contract was a hoped-for estimate.”  Evidence that the commitment in the contract was not really what it seems to be may not even be admissible in court.  Generally, unless a contract really is ambiguous, allowing for the Court to admit or consider outside or “parol evidence,” a Court will judge a contract’s requirements based upon the written document, not taking into account external evidence that 500 widgets didn’t really mean 500 widgets.  Nor is the doctrine of “mistake” in the formation of the contract usually much help.   “It is settled that to warrant a unilateral rescission of a contract because of mutual mistake, the mistake must relate to basic or material fact, not a collateral matter.” [Wood v. Kalbaugh (1974) 39 Cal.App.3d 926, 932 ]  “A mistake need not be mutual. Unilateral mistake is ground for relief where the mistake is due to the fault of the other party or the other party knows or has reason to know of the mistake. . . . To rely on a unilateral mistake of fact, the party must demonstrate his mistake was not caused by his ‘neglect of a legal duty.’ Ordinary negligence does not constitute the neglect of a legal duty as that term is used in [civil code] section 1577.” [Architects & Contractors Estimating Service, Inc. v. Smith (1985) 164 Cal.App.3d 1001, 1007-1008]. 

The doctrine of Force Majeure (which is French for “superior force”) is generally only applicable to nonperformance caused by unforeseen large events, such as the recent Covid 19 episode which obviously rendered many commercial activities infeasible.  It does not apply to circumstances where a party is simply overly optimistic in committing to contractual terms.  A “force majeure” clause  is a contract provision that relieves the parties from performing their contractual obligations when certain circumstances beyond their control arise, making performance inadvisable, extremely impracticable, illegal, or impossible.  In the real world, these clauses rarely apply to the more common scenario in a breach of contract lawsuit where one side is simply careless in the performance that it contractually committed to.

Similarly, courts generally narrowly construe the affirmative defenses of “impracticability” or “frustration of purpose” and in a practical sense it is often very difficult to win a breach of contract suit based upon such defenses.  These doctrines generally require the defense to show that he or she could not have foreseen the circumstance that makes performance infeasible or impossible and that the circumstance rendered performance worthless or nearly so.  [See California Civil Code Section 1932; see also California Commercial Code Section 2615].  These conditions are obviously narrow and from a practical standpoint it is usually a challenge to argue them in a trial.

The bottom line is that when entering into a contract, a party is well advised not to commit to any performance that the party is not confident that he or she can meet.  Remember that affirmative defenses such as mistake, frustration, impossibility and/or impracticability, or force majeure are just that, only defenses.  Courts take breach of contract scenarios very seriously and are not interested in re-doing contracts to protect careless or sloppy commitments by a party.  In such a case, a court is much more likely to simply make a finding of breach of contract and award damages to the other side.  While sometimes this can be avoided where an affirmative defense really does apply, it is always better not to give the other side leverage over you by signing a contract the terms of which you cannot meet.

If you are involved in a breach of contract dispute, Buffington Law Firm invites you to contact us immediately for a Free Legal Consultation.  All consultations are with an experienced breach of contract attorney, and there is never any obligation or charge.  And all discussion are completely confidential and protected by the attorney-client privilege.