As a civil litigation attorney, I commonly see breach of contract issues that affect businesses and individuals. Contract issues are central to many types of litigation, including business, real estate, banking, insurance, and construction disputes.
When someone makes a promise, you expect that promise to be honored. Disputes often center upon one party's failure to make payment, deliver goods, or perform services.
This Frequently Asked Questions (FAQs) page will discuss 50 questions that clients often ask attorneys about breach of contract in Minnesota. If you can understand these contract principles, you can limit your risk and resolve issues that arise.
Proving Breach of Contract Claims
1. What are the Elements of a Breach of Contract Claim in Minnesota?
Minnesota courts generally require a plaintiff to show three elements:
(1) the formation of a contract;
(2) the plaintiff's performance of conditions precedent to its right to demand performance from the defendant; and
(3) the defendant's breach of the contract.
Lyon Fin. Servs., Inc. v. Illinois Paper , 848 N.W.2d 539, 543 (Minn. 2014).
Also, a plaintiff must show damages he or she sustained with reasonable certainty. The plaintiff has the burden of proof on these issues.
2. How Do I Show that a Valid Contract was Formed (element 1)?
Basically, you must show that you and the other party agreed to something. Among other things, there must be some form of “consideration” (an exchange or money or promises).
If you have a signed contract in writing, this should be sufficient. However, parties do not always have a “clean” contract containing all the terms. The parties may have exchanged emails, letters, or otherwise negotiated the issues. In these cases, you may have to collect and organize your communications with the other party in order to prove the formation of a contract.
Under the Uniform Commercial Code (UCC) (Minn. Stat. § 336.2-101, et. seq.) and general contract law in Minnesota, you can sometimes cobble these communications together to create or supplement a contract. However, if there is some form of a contract, check to see if there is a merger clause or integration clause (i.e., “this is a full and final expression of the parties' agreement”). If so, you may not be able to add any terms from emails or other communications.
If you have purely an oral contract, it still might be valid. You will need to assemble any evidence you can think of (text messages, phone records, in-person notes, etc.) to show that you had an oral agreement with the other party. An oral contract is more likely to be upheld when the parties start performing the terms of it. As such, assemble any evidence you can find on ways in which you or the other party started performing the contract. Keep in mind that certain types of oral contracts might be invalid under the Statute of Frauds (Minn. Stat. § 513.01-.07), which requires certain contracts to be in writing (real estate contracts, long-term leases, contracts that take more than a year to perform, etc.).
3. How Do I Show that I Performed “Conditions Precedent” (element 2)?
Basically, this means that you performed your part of the contract (or at least those parts that had to be done first). If you do this, then the other party had to perform his or her promises.
The plaintiff can show that he or she performed “conditions precedent” through any evidence. It could be testimony from the party or a witness. It could be photographs, texts, emails, or any other evidence. If you can show that you performed your conditions precedent, you have met the second element of a breach of contract claim.
Here is more formal definition of conditions precedent from a Minnesota court:
A condition precedent is a contract term that calls for the performance of some act or the happening of some event after the contract is entered into, and upon the performance or happening of which [the promisor's] obligation is made to depend. . . . “[I]f the event required by the condition does not occur, there [is] no breach of contract."
Capistrant v. Lifetouch National School, 916 N.W.2d 23, 27-28 (Minn. 2018).
Example 1: You own a home and your contract says that “the contractor will install siding to the home, and then homeowner will pay for the installation.” If the contractor does the work, he has fulfilled his condition precedent and could sue you if you don't pay him.
Example 2: Your contract instead says that “the homeowner will make a $1,000 deposit, then contractor will install the siding to the home.” The condition precedent here is the deposit. You, as the homeowner, have to make the deposit before the contractor installs siding. If you make the deposit, you have met your condition precedent. You can sue the contractor if he or she does not install the siding. (This is a common issue in construction litigation.)
4. How Do I Show that the Defendant Breached the Contract (element 3)?
You show the judge or jury what the contract terms required of the defendant, and the meaning of those terms. You can show the defendant's breach of contract through any evidence. It can be your testimony, testimony or an admission you get from the other party, or testimony from another witness. Likewise, you could support your claim with photographs, texts, emails, maps, charts, or any other evidence. The evidence could be direct (“I was at the work site and the subcontractor never showed up”) or circumstantial (“if the subcontractor showed up and dropped off the material, we would have seen it”).
As discussed in more detail below, the defendant must breach a “material” term of the contract (see FAQ #15 below). If the defendant breaches a minor or insignificant part of the contract (contractor showed up 15 minutes late but still performed the work), you might not be entitled to damages.
5. What if I Can't Find the Original Signed Contract?
You are probably fine. You generally do not have to produce the original contract to prove a breach of contract claim. A signed copy of the contract is generally sufficient. If necessary, a court may even be able to reconstruct the contract without a written copy.
However, if the other party argues that no contract was ever formed, it is best to have the original contract or a signed copy. While contracts don't have to be notarized, the notary stamp can help show that your opponent actually signed the contract.
Yes. While it doesn't hurt to have the original, a copy is generally fine.
6. What if I Have an Oral Contract or an Oral Modification to a Written Contract?
Generally, you can sue on an oral contract and have it enforced. It can be more challenging to prove the exact terms of an oral contract and agreement to each of those terms, but it is commonly done.
The issue to watch for is the Statute of Frauds (Minn. Stat. § 513.01, et. seq.), which requires that certain types of contracts be in writing. This includes real estate contracts and contracts that take more than a year to perform. Those must be in writing. There are some exceptions to the Statute of Frauds, including oral contracts where the parties have partially performed and those involving “promissory estoppel” (where you detrimentally rely on a promise made by the other person).
7. Can I Sue for Breach of a Lease?
Yes, a lease is a contract and the general rules of contracts apply to commercial leases and residential leases. But there also may be rules implied in the lease from Chapter 504B of Minnesota Statutes, which governs landlord-tenant issues. For example, these statutes provide specific procedures in the event the lease is breached, such as evictions or tenant remedies actions. You should understand how these statutes “supplement” your lease and that you may not be able to “write out” the statutory requirements.
8. Is there a “Good Faith” Requirement for All Minnesota Contracts?
No, Minnesota courts have been reluctant to imply a requirement of “good faith and fair dealing” into all contracts. However, you can specifically write it into your contract if you want. Even if you don't write it in, your particular contract or circumstances may require that both parties perform their contractual obligations in good faith. You should do your best to perform your promises in the contract. If there are unusual or unexpected circumstances, it is best to talk to the other party to work out a solution before there is a fight over who breached the contract.
9. What Happens if the Contract is Unclear, Vague, or Ambiguous?
You may still have a contract, but you will have to figure out what the terms of the contract mean. When judges interpret contracts, they first look to see if there is any ambiguity in the contract. “Ambiguity” means that there are two or more reasonable interpretations of the word or phrase.
If there are ambiguous terms, judges can look to “parol evidence” (evidence outside the contract) to figure out the parties' intent for the word or phrase. See, e.g., Staffing Speficix, Inc. v. TempWorks Mgmt. Servs., 913 N.W.2d 687, 692 (Minn. 2018). Sometimes, judges interpret ambiguous terms against the party that drafted the contract if the drafter had more power over the other party (such as insurance contracts).
Basically, there is guess-work involved when the contract is unclear. While the easiest way to avoid the issue is to draft the contract better, the most practical approach is to find a solution with the other party when a question arises. You should consider making a signed written amendment to the contract that defines a term, phrase, or obligation of a party. That way, you avoid the “he said, she said” disputes that take time and money to resolve in court.
10. What if the Contract has Mistakes?
A “mistake” occurs when the contract fails to reflect the true intent of the parties. If you get along with the other party, you can do a simple amendment to correct the issue. This often occurs with real estate contracts or mortgages that have a mistake with the legal description of land. The parties can agree to amend or “reform” the deed or mortgage. This is a simple and inexpensive process.
But if the parties don't get along and there is no agreement, then a party can try to the judge “reform” the contract to fix the mistake. The mistake must be clear to the court, and your pleadings must identify the mistake in detail. Courts have said that the plaintiff must prove a mistake occurred by showing:
(1) there was a valid agreement between the parties expressing their real intentions;
(2) the written instrument failed to express the real intentions of the parties; and
(3) this failure was due to a mutual mistake of the parties, or a unilateral mistake accompanied by fraud or inequitable conduct by the other party.
Leamington Co. v. Nonprofits' Ins. Assoc., 615 N.W.2d 349, 354 (Minn. 2000).
A judge may be more likely to correct the mistake against the drafter of the contract. While there is no guarantee that the contract will be “reformed”, it can be a necessary argument to make in cases where the meaning of contract terms is unclear.
11. What if One Party Wants to Change or Modify the Contract?
Once the contract is signed and finalized, the parties must agree on a modification to the contract in order to change it. Most written contracts have a clause that requires any modifications to be in writing (i.e., “No oral modifications will be effective.”). If so, you will have to make the change in writing. On the other hand, if the contract lets you change it orally, it still may be good to make some written record by text, email, letter, or otherwise.
If you have a breach-of-contract lawsuit, you have limited ability to change the terms or meaning of the contract. The judge usually looks to the “four corners” of the contract to interpret the parties' obligations, not any outside evidence. A party with a weak position may try to present evidence to change or alter the meaning of the contract terms (or add terms). This generally is barred by the “parol evidence” rule. See, e.g., Hruska v. Chandler Assoc., Inc., 372 N.W.2d 709, 713 (Minn. 1985) ("when parties reduce their agreement to writing, parol evidence is ordinarily inadmissible to vary, contradict, or alter the written agreement."); Gutierrez v. Red River Distrib. Inc., 523 N.W.2d 907, 908 (Minn. 1994) ("where a written agreement is ambiguous or incomplete, evidence of oral agreements tending to establish the intent of the parties is admissible.").
The key is to take the time to fully and accurately state the contract terms from the outset. If any unexpected things arise later on, do your best to work with the other party on a modification. If there is a contract dispute or lawsuit, understand that the four-corners of the contract will be the focus of a judge's analysis.
12. What if One of the Parties is Under 18 Years Old?
You should be careful. The adult must perform all his obligations under the contract. If not, the minor could sue for breach of contract.
However, a minor under the age of 18 can void a contract and a judge may not enforce it against the minor. If the child voids the contract (cancels, terminates, or simply does not perform), there is not much the adult can do. A breach of contract case will probably not go very far. If both parties have performed aspects of the contract or the minor accepted or performed aspects of the contract, a court could be more willing to find a valid contract.
Note that the minor can generally affirm the contract when he or she becomes an adult, in which case the contract would still be valid. If there is a question about signing a contract with a minor under age of 18, it may be best to have the child's parents sign as well so you have someone to go after if the contract is breached.
13. What if One of the Parties has Dementia or Some Other Condition?
You should be careful in this instance. If the person was incapacitated when the contract was signed, then the person (or that person's attorney-in-fact or conservator) can void the contract. You likely cannot enforce the contract.
If the person becomes incapacitated after the contract is signed, then the contract is likely still effective. There may be some legal principles that could lessen the harm to the incapacitated person (impossibility of performance), but there still could be a breach-of-contract claim to bring against the person's attorney-in-fact or conservator. You may not be a sympathetic party by suing the incapacitated person, but you may nonetheless have legal rights under that contract that can be upheld.
14. Who Was the First Party to Breach the Contract?
Many commercial disputes and other breach-of-contract cases center upon this issue. It often arises when one party fails to perform some aspect of the contract, which then causes the other party to stop performing altogether. Then both parties point fingers at each other, stop performing the contract, and start a lawsuit.
It is important to understand that you must generally keep performing your obligations until the other party has committed a “material” breach of the contract (see following FAQ for more detail). If they breach an important, or “material” part of the contract, you can terminate the contract and sue for breach of contract (assuming that you have performed your “conditions precedent”).
If you stop performing because of a minor breach by the other party, you may have breached the contract. This distinction (minor vs. material breach) is important, but hard to sort out in practice. When in doubt, you should keep performing but seek an explanation as to why the other party is not performing. Perhaps they simply have a different interpretation of the contract or forgot to do something. You should get a clarification on if they intend to perform and can warn them about the consequences for not performing. Communication at this stage is key, and you can consider a negotiated change to the contract if necessary.
15. What is a “Material” Breach of Contract?
A “material” breach is another term for a total breach of contract, which is a ground for terminating the contract and suing the other party. Here is a more formal definition:
"A material breach is `[a] breach of contract that is significant enough to permit the aggrieved party to elect to treat the breach as total (rather than partial), thus excusing that party from further performance and affording it the right to sue for damages.'"
BOB Acres, LLC v. Schumacher Farms, LLC, 797 N.W.2d 723, 728-29 (Minn. Ct. App. 2011).
A “partial”, “minor”, “immaterial” breach is one that relates to an insignificant aspect of the contract. Generally, you cannot sue the other party or terminate the contract for this type of breach.
The distinction is sometimes hard to make, but it makes a difference. For example, if the other party fails to pay you under the contract, that's probably a material breach for which you can sue for damages. On the other hand, if the other party paid you by check instead of cash, that's insignificant and not grounds for a breach of contract. When in doubt, keep performing under the contract and get a clarification from the other party.
16. What Can You Do if You Expect the Other Party to Breach the Contract?
Under some circumstances, you can cancel the contract based on evidence that the other party will not perform. This is called “anticipatory repudiation.” When “the writing is on the wall”, you can declare a material breach and sue for damages. Usually, it has to be pretty clear from the other party's statement (“My machine is broken and I can't deliver the goods.”) or some action by the other party (the contractor fails to show up to fix your house for an extended period of time). Here is a formal explanation:
- Anticipatory breach occurs when there is "an unconditional repudiation of a contract, either by words or acts, which is communicated to the other party prior to the time fixed by the contract for his performance." In re Haugen,278 N.W.2d 75, 79 n.6 (Minn. 1979).
- "An anticipatory breach by repudiation occurs where a vendor cannot possibly perform and where by its conduct it demonstrates an unequivocal intent not to perform." State ex rel. Friends of the Riverfront v. City of Minneapolis, 751 N.W.2d 586, 593 (Minn. Ct. App. 2008).
- The adversarial party may treat the renouncement as a breach of contract and bring an action for damages. Space Ctr., Inc. v. 451 Corp.,298 N.W.2d 443, 450 (Minn. 1980).
The key is to carefully listen to what the other party says or what they do. Assess whether it is clear enough to allow you to cancel the contract. If you don't have enough evidence but cancel the contract, you can risk being sued for breach of contract.
17. What I Get “Burned” by Promises from the Other Party?
Usually, the focus is on the four-corners of the contract to figure out the parties' obligations. However, sometimes there is no clear contract, but the other person makes promises on which you rely. You may be able to rely on a theory of “promissory estoppel” to allow a court to create a contract in this situation.
In Minnesota, to state a claim for promissory estoppel, the plaintiff must show that
(1) there was a clear and definite promise,
(2) the promisor intended to induce reliance and such reliance occurred, and
(3) the promise must be enforced to prevent injustice.
Olson v. Synergistic Techs. Bus. Sys., Inc., 628 N.W.2d 142, 152 (Minn. 2001).
For example, a company says it would give you a contract if you bring your work crew to another state. While there is no signed contract, you spend the time and money to travel to the job site. The other party then says he gave the contract to someone else. You might be able to sue under a promissory estoppel theory because you detrimentally relied on his promise.
18. What Breach-of-Contract Defenses are Available?
There are many potential defenses in a breach-of-contract case. These include general defenses (“I didn't breach the contract”) and affirmative defenses (special defenses).
Here is a list of defenses that are used to show that the contract was invalid or unenforceable:
- Lack of “consideration”: There was no exchange of money or promises between the party when the contract was signed.
- Fraud: One party fraudulently induced the other party to sign the contract. The “victim” of fraud can void the contract.
- Incapacity: One party was incapacitated and unable to understand the contract at the time it was formed. That party, or that party's representative, can void the contract.
- Mistake: The parties made a mistake on an important issue. The defendant may either argue that the mistake voids the whole contract, or an important term in it. (A plaintiff may try to “reform” the contract to fix the mistake.)
- Duress: One party was improperly threatened or pressured to sign the contract. This may involve physical violence, threat of violence, or some other threat. If so, the “victim” of duress can void the contract.
- Undue influence: This is similar to duress, except that undue influence often involves a person in a position of trust taking advantage of another person. Examples include a doctor taking advantage of a patient or a financial advisor taking advantage of a vulnerable client. The “victim” can void the contract.
- Unconscionability: This defense involves a totally one-sided contract. This is a hard defense to show, but it may be raised along with other defenses when there is a vulnerable party. Minnesota courts have that “a contract is unconscionable if it is such as no man in his senses and not under delusion would make on the one hand, and as no honest and fair man would accept on the other." Kauffman Stewart, Inc. v. Weinbrenner Shoe Co., 589 N.W.2d 499, 502 (Minn. Ct. App. 1999).
- Impossibility or impracticability: The contract has a condition that fails to occur or some other circumstance making it impossible or impractical for a party to perform. Usually, the impracticability defense is used in business cases under the Uniform Commercial Code (UCC). A party uses this defense to excuse his or her lack of performance.
- Illegality: A party is excused from performance if it would require an illegal act or otherwise involves illegal subject matter.
- Statute of Frauds: As discussed above, this rule prevents a party from enforcing certain kinds of oral agreements. This includes real estate contracts and contracts that take over a year to perform.
- Laches: One party waited way too long to bring a lawsuit. The delay has prejudiced a party's ability to defend the case.
- Other “affirmative defenses”: There may be many other potential defenses available to the defendant, including the statute of limitations.
19. What is an “Adhesion Contract”?
An adhesion contract is where one party has all the power and forces the weaker party to “take it or leave it” without any negotiation or change in the “template” contract. A court may refuse to enforce some or all of the contract against the weaker party.
This issue often comes up with insurance contracts and other consumer contracts. If the contract is ambiguous, the court is likely to interpret it against the drafter. But the court could also refuse to enforce the clause if it would be unconscionable.
Courts do not frequently find adhesion contracts (outside of the insurance context), but it can be worth raising if you think the other party took advantage of you. Here is a description of it by a Minnesota court:
By definition, an adhesion contract is drafted unilaterally by a business enterprise and forced upon an unwilling and often unknowing public for services that cannot readily be obtained elsewhere. It is a contract generally not bargained for, but which is imposed on the public for necessary service on a "take it or leave it" basis. Even though a contract is on a printed form and offered on a "take it or leave it" basis, those facts alone do not cause it to be an adhesion contract. There must be a showing that the parties were greatly disparate in bargaining power, that there was no opportunity for negotiation and that the services could not be obtained elsewhere.
Schlobohm v. Spa Petite, Inc., 326 N.W.2d 920, 923 (Minn. 1982)
Breach of Contract Damages
20. Can a Contract Limit or Bar Damages for a Breach?
Yes, to some degree. A defendant that points to such a clause in a contract may persuade a judge to dismiss the breach of contract claim or limit any potential damages.
Parties have some ability to include “indemnification”, “hold harmless”, and other limitations clauses. These are common in commercial contracts and commercial disputes. But these waivers or limitations are disfavored by courts and narrowly interpreted. Such clauses should expressly and clearly transfer the risk for one party's conduct. Schlobohm v. Spa Petite, Inc., 326 N.W.2d 920, 923 (Minn. 1982). The parties would probably have to describe the type of legal claim and specific categories of damages that they are intending to limit or bar. Even then, courts would strictly interpret the provision. So, if you want such a clause to be enforced, you need to be specific in the language of a contract.
21. What Damages can I get in a Breach of Contract Case in Minnesota?
There are many categories of damages available to a breach-of-contract plaintiff. Here is a basic list:
- Liquidated Damages: Damages listed in the contract itself in the event of a breach.
- Direct Damages: Damages the plaintiff sustains as a direct result of the breach (basically the cost of replacement performance for the “benefit of the bargain”).
- Consequential Damages: Damages that were foreseeable at the time the contract was formed and which indirect are derivative or one step removed from the “ (outside) the .
- Incidental Damages: Generally in a business context for products– foreseeable harms if the other business doesn't deliver.
- Punitive Damages: Damages to punish the other party's deliberate disregard for safety of others. Usually there has to be another claim to get these damages in a breach-of-contract case.
22. What are “Liquidated Damages”?
These damages come directly from the contract itself. If a party breaches the contract, the other party can get the liquidated sum shown in the contract. This gives the parties control over potential damages, which limits their contractual risk. Courts have said:
Liquidated damages are fixed sums, agreed to in advance, that the breaching party pays to the non-breaching party when (1) "the amount so fixed is a reasonable forecast of just compensation for the harm that is caused by the breach," and (2) actual damages are difficult to ascertain.
Gorco Constr. Co. v. Stein, 256 Minn. 476, 482, 99 N.W.2d 69, 74-75 (1959) (quoting Restatement (First) on Contracts § 339).
However, courts ignore such a clause if its goal is to punish, rather than compensate, a party. In such a case, the judge will have to make a judgment as to whether the sum is reasonable. The judge may look to purposes of the contract and the benefit that each party was to get through the contract.
23. What are “Direct Damages”?
Direct damages are those that stem directly from the breach. This is sometimes called the “benefit of the bargain”, which is the benefit to you if the other party performs the contract. Maybe you get a certain amount of revenue and profit, or perhaps you get a specific product or service. This depends significantly on your specific contract and the language of it. If the other party fails to perform, you will have to get someone else to replace that performance. That will cost you money. You can generally recover that money from the other party as an item of direct damages.
24. What are “Consequential Damages”?
These are damages are caused by the breach but not directly tied to the contract. This may include:
- loss of use of an asset or money,
- damage to property,
- lost profits,
- loss of goodwill,
- cost of substitute labor or property,
- breach of other contracts,
- personal injury damages,
- attorney's fees (potentially); and
- other collateral losses.
These damages must be reasonably foreseeable to the parties at the time of the breach. County of Blue Earth v. Wingen, 684 N.W.2d 919, 924-25 (Minn. Ct. App. 2004).
25. What are “Incidental Damages”?
Incidental damages are typically limited to business litigation involving products. Often, they come up in the case of shipped goods. Perhaps the other party failed to send you the goods or failed to send the proper goods. Incidental damages are those expenses reasonably incurred in receipt and custody of the product. Peterson v. Bendix Home Systems, Inc., 318 N.W.2d 50 (Minn. 1982).
Incidental damages might include storage, shipping and handling, finance charges, replacement good costs, costs of reselling the goods, and other related costs.
26. What are “Compensatory Damages”?
This is a generalized term asking what amount of money will put the plaintiff in the position he or she would have been if the other party performed the contract. The term may include direct or consequential damages. Generally, it's not seen as a separate category of damages in Minnesota breach of contract cases.
27. Can I Get “Punitive Damages” in a Minnesota Breach-of-Contract Action?
No, these are not generally available for a basic breach of contract. There usually must be some other claim included in the lawsuit (defamation, negligence, etc). If you have the ability to bring them, punitive damages can be significant. This is because the purpose is generally to punish the other party and to prevent such conduct from other people in the future.
Punitive damages may be allowed when the acts of the defendant “show deliberate disregard for the rights or safety of others.” Minn. Stat. § 549.20, subd. 1(a). You cannot include them in your complaint, but instead have to ask a judge to include them as part of a motion under Minn. Stat. § 549.191. In awarding them, a judge or jury would have to look at these factors under Minn. Stat. § 549.20, subd. 3:
- the seriousness of hazard to the public arising from the defendant's misconduct,
- the profitability of the misconduct to the defendant,
- the duration of the misconduct and any concealment of it,
- the degree of the defendant's awareness of the hazard and of its excessiveness,
- the attitude and conduct of the defendant upon discovery of the misconduct,
- the number and level of employees involved in causing or concealing the misconduct,
- the financial condition of the defendant, and
- the total effect of other punishment likely to be imposed upon the defendant as a result of the misconduct (including compensatory and punitive damage awards to the plaintiff and other similarly situated persons, and the severity of any criminal penalty to which the defendant may be subject).
28. How Do I Measure the Amount of Damages?
Make a list of the ways you have been affected by the other party's failure to perform the contract. See if there is a liquidated damages clause in the contract. If so, you might be limited to this sum. If there is no such clause, think of the ways you were affected by the other party's failure to perform the contract. Consider the costs of getting a replacement product or service. If any of your other contracts were affected, estimate the damage to those contracts or relationships. Add all categories of damages together and make your demand to the other party. If you cannot resolve the dispute, you may have to present your claim and damage calculation to a judge.
29. Can I Get Lost Profits or Revenues When a Business Contract is Breached?
Yes, lost profits is a category of consequential damages that may be available to you as a plaintiff. Lost profits are available if they are a natural and proximate cause of the breach, and if plaintiff proves them with reasonable (though not absolute) certainty. Olson v. Rugloski, 277 N.W.2d 385, 388 (Minn. 1979).
There may be many ways to show that the opposing party's breach caused your lost profits. A well-accepted method is to figure out the lost revenue and then subtract variable costs that would have been needed to generate the revenue. Sometimes, lost profits will be clear. Other times, you, your attorney, and possibly an economic expert witness will need to calculate lost profits. As part of this, you will have to figure out the time frame for the lost profits. There is usually no single method of calculating lost profits, so do your best to estimate them.
30. Can I Get Emotional Distress Damages in a Breach-of-Contract Case?
No, probably not in an ordinary breach of contract case. However, if your case involves other claims such as defamation or other torts, you may be able to claim some amount of emotional distress damages.
31. What Does it Mean to “Mitigate” My Damages?
It means that you must take reasonable actions to limit your damages. If you do not “mitigate” your damages, the judge may limit your overall damages in the case.
In theory, “mitigation” is a simple concept. If a tenant on a commercial lease is evicted, the building owner should take reasonable efforts to re-lease the space to a new tenant. That would “mitigate” the landlord's damages.
In practice, the concept can be hard to apply. The plaintiff may have difficult decisions to make. In the commercial lease example above, does the landlord have to take a low-ball offer or a risky tenant? The plaintiff and attorney will have to analyze this issue and make decisions about what “mitigation” means in their case. A judge will expect a plaintiff to at least consider his or her options and take some reasonable action to address the issue.
32. Can I Add My Costs and Attorney's Fees to My Damages?
Yes and no. You can almost always ask the court for your “costs and disbursements” as the prevailing party in the case. This includes court filing fees, deposition costs, expert costs, statutory fees, and other things.
However, you cannot get your attorney's fees unless (a) the contract provides for it (or some statute allows it), (b) you win the case, and (c) the amount of the attorney's fees are reasonable. This can be a valuable addition to damages in a case, and a definite risk to defendants in breach of contract cases.
33. What Other Remedies Can I Get if I Win My Breach-of-Contract Lawsuit?
In addition to money damages, there are several other remedies that a party can get. These are sometimes referred to as “equitable remedies” because the court is trying to do what is fair for the injured party. Remedies may include:
- Specific performance: This is an equitable remedy where the court can order the defendant to take some action to perform the contract. It often comes up in real estate cases where the court forces the defendant to convey land to the plaintiff, since land is viewed as unique. Shaughnessy v. Eidsmo,222 Minn. 141, 23 N.W.2d 362, 368 (1946). In awarding it, "a party does not have an automatic right to specific performance as a remedy for breach of contract; the district court must balance the equities of the case and determine whether the equitable remedy of specific performance is appropriate." Dakota County HRA v. Blackwell, 602 N.W.2d 243, 244 (Minn. 1999).
- Injunction: A court can issue a temporary or permanent injunction in certain breach of cases where there has been irreparable harm to a party and money damages will not sufficient make that person whole. Injunctions are considered an “extraordinary remedy” and are rarely given. But they can be an important remedy for some plaintiffs. If you experience issues beyond the recovery of money, consider asking a court for an injunction.
- Rescission: This means that the court has terminated some or all of the contract, which relieves a party of obligations under the contract. The court is able to use equitable powers to rescind some or all of the contract in certain cases.
- Reformation: The court rewrites the contract so that it is consistent with the parties' intent when the contract was formed. Often, this remedy is used to fix a mistake in the contract, but it could potentially be used to address other situations where the parties' intent was not properly reflected in the final contract.
Other Breach of Contract Issues
34. What if the Contract has an "Indemnification" or “Hold Harmless” Clause?
These are fairly common clauses in contracts. These clauses shift or limit liability between the parties. If you sue for breach of contract, you should check to see if these clauses apply. If so, it might bar some or all of the damages you seek against the other party.
In theory, the concept is simple: the other party is indemnifying you (reimbursing you) for something that happens to you. The party may also hold you “harmless” for something that happened to them.
In practice, these clauses can involve complex liability issues to sort out. Parties must be careful with these clauses. If they are too broad or too narrow, the party's liability could be greatly expanded or reduced. Most parties include template language for indemnification. While it is not necessarily bad, it is important to get this clause right. As such, you may need to customize the clause to your situation.
35. What State's Law Applies to a Breach-of-Contract Case?
It depends on the contract and the underlying facts. This can be an important question. You should understand this issue before you sign the contract.
If you live in Minnesota but have a contract applying Florida law (or even Brazilian law), you may be at a disadvantage and it will affect your overall risk. Check your contract to see if there is a “choice of law” clause or a “venue” clause (location of court) listed. If not, then you will probably look to the location(s) where the contract was negotiated, signed, or performed. This is often a legal question that a lawyer may need to answer for you.
36. In What Court Do I Bring a Breach-of-Contract Case?
It depends. You might bring it in the jurisdiction listed in the contract, the jurisdiction where the events occurred, the jurisdiction where the defendant resides, or perhaps another place under special rules or laws. You should first check the contract to see the jurisdiction and venue. Then, you may need to check the “personal jurisdiction” or “long-arm statute” in your location to see if you can sue the defendant there. If not, you will need to track down the appropriate place to sue the defendant.
You may even have an arbitration clause that takes you out of the traditional court system. If so, the arbitration clause probably will also have the preferred location of the arbitration. If no location is listed, you may able to bring it in any reasonable location that relates to the underlying facts.
37. Can I Bring a Breach-of-Contract Claim in a Probate Case?
Maybe, under limited circumstances. If you had a contract with the decedent that has not been fulfilled, you can either try to bring a creditor claim within the probate case or try to sue the Personal Representative in another case. The Personal Representative (or Trustee, in the case of a trust dispute) steps into the shoes of the deceased person and has responsibility for wrapping up the person's financial affairs. This includes responsibility for any contracts that are unresolved. While you may face an argument that the contract shouldn't be enforced due to the death, you may nonetheless have a valid claim under the contract or an argument for relief on an equitable claim.
38. What is the Statute of Limitations for a Breach-of-Contract Lawsuit in Minnesota?
It's often 6 years for general contracts (Minn. Stat. § 541.05). However, for business-to-business contracts under the Uniform Commercial Code (UCC), the statute of limitations is 4 years pursuant to Minn. Stat. § 336.2-725. The parties to the UCC contract may have some ability to reduce the limitations period to not less than 1 year.
The takeaway is to figure out the applicable limitations period when you experience a contract issue and to take prompt action.
39. Can I Cancel or Terminate the Contract?
Sometimes, you can cancel or terminate the contract. It may be as easy as following the “termination clause” in your contract and giving notice to the other party. There may not even be any consequences.
However, check your contract for any termination clauses that provide details on if the contract can be cancelled, how, and the consequences. You want to be careful not to breach the contract. If you tell the other party that you are cancelling the contract, he or she may sue you. Even by suggesting that you may cancel, it may have the same effect as breaching the contract.
If you truly can't perform your part of the contract, negotiate with the other party for a cancellation. You may have to offer the party some money or other benefit to get a cancellation, but it may be better than if you breached the contract. If you reach an agreement, make sure it is a formal signed cancellation that covers the details.
Note that to cancel some contracts, you may have to follow a statutory procedure. For example, to cancel a Contract for Deed involving land, you must follow Minn. Stat. § 559.21. To cancel a residential purchase agreement, you must follow Minn. Stat. § 559.217. This can be a touchy subject, so make sure you do it right.
40. What Differences are there for Business-to-Business (B2B) Contracts?
Commercial contracts sometimes have additional laws governing the parties' rights. While ordinary rules of contract generally apply to B2B contracts, the Uniform Commercial Code (UCC) or similar law may also apply. If so, these laws can significantly change the rights of the parties to these commercial contracts.
41. Does the Uniform Commercial Code (UCC) Impact the Contract?
Yes, it generally applies to B2B contracts, but also to contracts between a business and consumer. Article 2 of the UCC applies generally to the “sale of goods”, but not generally to services. See Minn. Stat. § 336.2-101 to Minn. Stat. § 336.2-725. There are very detailed provisions in the law about aspects of these contracts, including rules about whether you can “waive” or write out the UCC rules. Since these rules can be complex, you may need an attorney to help you understand your contractual rights.
42. How Long Does it Take to Litigate a Breach-of-Contract Lawsuit?
For a full discussion, see How Long Does a Civil Lawsuit Take in Minnesota? - FAQs. The short answer is that while it may take a few weeks to negotiate a solution when the parties get along, it can sometimes take 6-12+ months to litigate a breach of contract case in Minnesota courts. Before you start a breach of contract case, you should consider this timeline and whether it impacts other aspects of your business or personal life.
43. What are “Equitable Claims”?
Equitable claims arise when more traditional claims, such as breach of contract, are not applicable. The reasoning is that courts should retain some ability to act when equity or fairness requires it. In the context of breach of contract cases, courts can sometimes give equitable relief by recreating a contract or being flexible when it grants remedies.
44. What is a “Quasi-Contract” Claim?
Sometimes, there is no formal contract between the parties, but the court will treat the situation like a contract (a “quasi-contract” or “implied-in-fact” contract”). Courts do this for fairness purposes when there is some connection or arrangement between the parties.
One example is an “unjust enrichment” claim, which involves a situation where the defendant got an unfair benefit from the plaintiff. This requires the plaintiff to show:
(1) a benefit be conferred by the plaintiff on the defendant;
(2) the defendant accept the benefit; [and]
(3) the defendant retain the benefit although retaining it without payment is inequitable.
Zinter v. Univ. of Minn., 799 N.W.2d 243, 247 (Minn. Ct. App. 2011), review denied (Minn. Aug. 16, 2011).
Another example is an “account stated” claim, where the defendant keeps something of value without paying for it (often when there were prior arrangements between the parties). This is a common claim made by credit card companies when the customer makes charges, receives account statements, and does not dispute the charges. With an account stated claim, the plaintiff must show:
(1) a prior relationship as debtor and creditor,
(2) a showing of mutual assent between the parties as to the correct balance of the account, and
(3) a promise by the debtor to pay the balance of the account.
Mountain Peaks Fin. Servs., Inc. v. Roth-Steffen, 778 N.W.2d 380, 387 (Minn. Ct. App. 2010), review denied (Minn. Apr. 28, 2010).
45. Can I Assign or Transfer the Contract to Someone Else?
Maybe. Look to the language of your contract. Contracts such as leases often allow the tenant to assign rights to another person with permission of the landlord, and that “permission shall not be unreasonably withheld.” The question is whether there is a reasonable reason to deny the request. Many other contracts have similar assignment clauses.
If your contract is silent on the issue, you might not be able to assign your rights without negotiating it with the other party.
If your contract prohibits assignment, you probably can't assign your rights. Minnesota courts have said that “as a general principle of contract law, an anti-assignment provision in a contract is valid and enforceable, and operates to defeat an otherwise valid assignment. Stand Up Multi. Advantage v. Am. Fam. Ins., 889 N.W.2d 543, 548 (Minn. 2017).
46. What Does it Mean to “Buy Out” the Contract?
It generally means that a party pays something to cancel the contract. Almost any contract could potentially be bought out. It's usually a matter of the price of the cancellation.
For example, if a tenant has to move out early, she may offer the landlord a percentage of the remaining rent in order to cancel the lease. The landlord doesn't have to accept a buyout, and could potentially sue for breach of contract if the tenant moves out early and fails to pay rent. However, it can make sense to negotiate a resolution.
Other times, the contract has a buy-out clause that specifies the amount of a buyout and the procedure. This can be beneficial if parties want to secure a contract but want the flexibility to cancel it on reasonable terms.
47. What Happens if One Party Dies Before the Contract is Done?
You should first look to the contract for guidance. If it says that the contract is binding on each party's “heirs and assigns”, then a death may not terminate the contract. In such a case, you would look to the heirs, trustee, or personal representative if there is a probate. It may take some communication and negotiation to see if any amendments should to be made to account for the change in circumstances.
If the contract is silent, the rights of the parties may be unclear. The decedent's family might argue that the contract is unenforceable and terminated because it is impossible to perform due to the death. The opposing parties may argue that if it should be terminated, a quasi-contract should be created by a court to account for the plaintiff's efforts related to the contract.
48. Do Special Rules Apply to a Contract for Deed?
Yes, there are some unique rules. A Contract for Deed is a special type of real estate contract where the buyer gets a deed once all the payments are made. It is an alternative to a mortgage.
If the buyer fails to make payments or fulfill other conditions, he technically has breached the contract. However, the seller cannot immediately terminate the Contract for Deed like he could for a normal contract. Instead, the seller must follow the statutory procedures in Minn. Stat. § 559.21, which requires a notice to the buyer and time for the buyer to cure the problem.
49. Are There Any Special Rules for Public Contracts?
Yes, there can be special laws and rules that apply to public contracts with cities, counties, states, and the federal government. Laws may add obligations to the contract and there can be special procedures that govern breach of contract, so be aware of those rules. Commonly, there are also rules that govern the formation of the contracts, such as competitive bidding. For federal contracts, the Contract Dispute Act and many agency regulations may apply. This is a specialized area of legal practice, so you should consider speaking with an attorney that has experience in in this area before you sign a public contract.
50. Are There Special Rules for Internet Contracts?
Yes, there are some unique rules for internet contracts. Traditional rules of contract generally apply to internet contracts. However, statutes tend to supplement these contracts or provide how they can be formed. Some electronic contracting laws include:
- The Uniform Electronic Transactions Act (Minn. Stat. § 325L.01, et. seq.).
- The Electronic Signatures in Global and National Commerce Act (E-SIGN) (15 U.S.C. § 7001(a)).
- Uniform Computer Information Transactions Act (UCITA).
There is also a modern trend toward SaaS (software as a service) contracts for licensing of software. While they can be complex, they are generally viewed as valid. This is a growing and specialized field of contract law, so it is advisable to speak to an attorney in addressing SaaS contract issues.
If you need a lawyer for a breach-of-contract dispute or lawsuit, Contact Us for a free consultation. With offices in Shakopee (Scott County) and Litchfield (Meeker County), we serve clients throughout the Twin Cities and Greater Minnesota.