Understanding Breach of Contract in the Silicon Valley

Two vendors working in computer licensing decide to enter an agreement together to merge companies in the Silicon Valley. They decide that combining forces and assets would help them to set a better footprint in the industry while also maximizing profits. As part of the merger, they both agree to share financial information about each other’s profits and losses for the past five years. Just as the agreement is about to be signed and the companies have landed a new client, company A backed out of the agreement at the last minute. Is this considered a true breach of contract? If so, to what damages is company B entitled?

A breach of contract is a failure by one party to uphold their duties according to the terms of the contract. It is a violation of the contract terms without a justifiable excuse. A breach of contract cannot occur unless there is a contract itself. A contract is sometimes referred to as a meeting of the minds, but it has three elements, offer acceptance, and consideration. Two parties must intend to be bound together in order to form a contract. Some examples of a breach of contract include lost volume, illusory promises, failure to deliver or failure to meet allegations.

For example, if one party sues another party for breach of contract alleging that the defendant failed to deliver one time, the burden of proof is on the plaintiff to prove this. This issue often occurs amongst UCC vendors, organizers and sellers may have volume contracts with other vendors. UCC law indicates that it is the seller's obligation to transfer and deliver goods and the buyer’s obligation to accept and pay for goods. UCC §2-612. One missed shipment might not cause a delay, but multiple shipments could reflect a breach.

Whether a plaintiff is entitled to damages depends upon if there was a true breach of contract. This is something that is usually determined in court. There may also have been a partial breach or total breach. If a breach has occurred, the court has several options. The plaintiff may have asked specific performances. This means instead of asking for money to make them whole, the plaintiff is instead asking the court to order the defendant to fulfill their end of the bargain. A plaintiff might also ask for monetary damages including compensatory damages for actual losses. In the next installment of this blog, the authors will discuss damages for breach of contract in more depth.

If you entered into a contract with a merchant, seller, vendor or other entity and you believe that a breach has occurred, it is crucial that you contact an experienced attorney as soon as possible. It is very likely that you may be entitled to damages for your losses but business litigation cases are extremely complicated. Our lawyers at SAC Attorneys help business clients of all sizes throughout Silicon Valley and can help you determine if you are entitled to recovery for your losses. Call today to schedule a consultation.