A supplier ships half the order. A client stops paying invoices. A business partner walks away from a deal halfway through. When the other side does not do what it promised, the first question most business owners ask is simple: is this a breach of contract, and what can I do about it?
In short, a breach of contract in California happens when one party fails to do something the contract requires, or does something the contract prohibits, without a legal excuse. To recover in court, you generally must show four things: the contract existed, you held up your end, the other side broke it, and the breach caused you harm.
At Jafari Law Group, our Orange County breach of contract attorneys represent businesses in contract disputes from our office in Irvine. Below, we explain what counts as a breach under California law, the deadlines that apply, and the remedies available.
What You Must Prove in California
California’s civil jury instructions list the elements of a breach of contract claim (CACI No. 303). In general, you must prove that:
- You and the other party entered into a contract.
- You did all, or substantially all, of the significant things the contract required you to do, or you were excused from doing them.
- Any conditions that had to happen before the other party’s performance occurred, or were waived or excused.
- The other party failed to do something the contract required, or did something the contract prohibited.
- You were harmed.
- The other party’s breach was a substantial factor in causing that harm.
The second element is where many businesses get into trouble. If you also failed to perform, expect the other side to argue that your breach came first or excused theirs. So before you stop performing in response to a breach, get advice. Stopping too early can turn a strong claim into a fight about who breached first, and that fight is expensive.
Does the Contract Have to Be in Writing?
Not always. In California, oral contracts and contracts implied from conduct can be enforceable. But certain agreements must be in writing and signed to be enforced, under what is called the statute of frauds (Civil Code § 1624). These include:
- Agreements that cannot be performed within one year.
- Promises to pay someone else’s debt.
- Leases longer than one year, and sales of real property or an interest in it.
- Commercial loan commitments over $100,000.
Even when a writing is not required, a written contract is far easier to prove. If you do not have a signed agreement, do not assume you have no case. Emails, text messages, invoices, purchase orders and a history of payments can all help show what the parties agreed to.
Types of Breach
Material breach. A breach that goes to the heart of the deal, such as failing to deliver the product at all, or delivering something that does not work. A material breach may allow the other party to end the contract and seek damages.
Minor breach. A breach that does not defeat the purpose of the contract, such as a short delay or a small defect. The injured party can usually recover damages but must keep performing.
Anticipatory breach. When one party clearly says, or shows through its actions, that it will not perform before performance is due. For example, imagine a distributor that emails its supplier a month before delivery to say it will not accept or pay for the order. The supplier may not have to wait for the delivery date to act.
Late or partial performance. Whether this is a breach, and how serious it is, depends on what the contract says about timing and how important it was.
Common Examples for Businesses
- A customer that stops paying for goods or services already delivered.
- A vendor that fails to deliver on time, or delivers goods that do not match the specifications.
- A contractor that does poor or incomplete work.
- A partner or shareholder who violates an operating agreement or buy-sell terms (see our page on partner and shareholder disputes).
- A tenant or landlord that defaults on a commercial lease (see commercial lease disputes).
- A party that shares information in violation of a confidentiality agreement.
Defenses the Other Side May Raise
Expect the other side to tell its own story. These are the defenses that come up most often:
- There was no binding contract, or its terms were different.
- You breached first, or did not do your part.
- The breach was excused, for example because a condition never happened or performance became impossible.
- You waived the requirement by accepting late or partial performance without objection.
- The claim was filed too late.
- The damages are speculative or were not caused by the breach.
Remedies for Breach of Contract
Damages. The main remedy. California law allows damages that compensate for all the harm the breach caused, or that was likely to result in the ordinary course of things (Civil Code § 3300). You cannot recover more than you would have gained if both sides had fully performed (Civil Code § 3358). Just as importantly, you have a duty to take reasonable steps to limit your losses, such as finding a replacement supplier, and a court may reduce your recovery if you do not.
Liquidated damages. Some contracts set the damages in advance, for example a fixed amount per day of delay. In business contracts, these clauses are generally valid unless they were unreasonable under the circumstances when the contract was made (Civil Code § 1671).
Specific performance. In some cases, a court can order the other party to do what it promised (Civil Code § 3384). This is more common when money cannot fairly replace what was promised, such as a unique property.
Rescission. In limited situations, such as fraud, mistake or a failure of what was promised in exchange, a party may be able to undo the contract (Civil Code § 1689).
Interest. If the contract does not set an interest rate, California law generally sets interest at 10 percent per year after a breach on amounts that are certain or can be calculated (Civil Code §§ 3287, 3289).
Attorney’s fees. Each side usually pays its own attorney’s fees. But if the contract includes an attorney’s fees clause, California makes it work both ways: the party that prevails can recover reasonable fees, even if the clause was written to benefit only the other side (Civil Code § 1717).
Deadlines to Sue
California sets a statute of limitations for contract claims:
- Written contracts: four years (Code of Civil Procedure § 337).
- Oral contracts: two years (Code of Civil Procedure § 339).
The clock generally starts when the breach occurs. Note that some contracts shorten the time to bring a claim, or require notice, mediation or arbitration first. Do not wait to read the fine print.
What to Do Now
- Read the contract closely, including any notice-and-cure, dispute resolution, arbitration, forum and attorney’s fees clauses.
- Gather your documents: the contract and amendments, emails, texts, invoices, delivery records and payment history.
- Write a timeline of what was promised, what happened and when.
- Keep records of your losses and the steps you took to limit them.
- Be careful about stopping your own performance until you have advice.
- Consider a written demand. A clear demand letter is often the first formal step. Our guide to breach of contract demand letters explains how to send one, and how to answer one.
Frequently Asked Questions
What is a material breach of contract?
A material breach is one serious enough to defeat the main purpose of the contract. It may allow the other party to stop performing and seek damages.
Are oral contracts enforceable in California?
Often, yes. But some agreements must be in writing under the statute of frauds, and oral agreements are harder to prove. The deadline to sue on an oral contract is two years.
How long do I have to sue for breach of contract in California?
Generally four years for a written contract and two years for an oral one, measured from the breach. Your contract may impose additional requirements.
What are liquidated damages?
An amount the parties agreed in the contract to pay if a breach occurs. In business contracts, California generally enforces these clauses unless they were unreasonable when the contract was made.
Can I recover my attorney’s fees?
Only if the contract or a statute allows it. If your contract has a fees clause, California law lets the prevailing party recover reasonable fees, whichever side that is.
Talk With a Breach of Contract Lawyer
Contract disputes are often won or lost on the early steps: what you send, what you keep doing, and how quickly you act. Jafari Law Group is based in Irvine and represents businesses throughout Orange County in business litigation. We are trial attorneys who have handled over 100 cases in state and federal courts, and we prepare every matter with that in mind.
If a deal has gone wrong, talk with a breach of contract lawyer at our Irvine office. We will review the contract with you and give you a clear read on your options. Request a free evaluation online or call 949-362-0100.