The 7 Questions You Should Ask Regarding Breach Of A Contract | Breach of Contract Lawyer

At Mattox & Wilson, our decades of experience as contract attorneys have taught us that understanding your rights and obligations under a contract is paramount. When a contract is breached, it can lead to significant confusion, frustration, and potentially substantial financial loss. Whether you are a business owner, a service provider, or a consumer, knowing the right questions to ask can guide you through the murky waters of contract law. Here, we address the seven critical questions you should consider if you’re facing a breach of contract situation in Indiana.

If you need assistance with a contract or have questions regarding a potential breach of contract, we invite you to call our office at 812-944-8005 to schedule a consultation.

What Happens When a Contract Is Breached In Indiana?

When a contract is breached in Indiana, the consequences and available remedies depend on the nature of the breach and the terms of the contract. A breach occurs when one party fails to fulfill their obligations under a legally binding agreement, whether by not performing a duty specified in the contract, not performing in a timely manner, or not performing in accordance with the terms agreed upon.

Here are the typical steps and outcomes when a contract is breached in Indiana:

• Determination of Breach Type. First, it’s determined whether the breach is material or minor. A material breach significantly affects the contract’s value, allowing the non-breaching party to terminate the contract and seek damages. A minor breach, however, may only entitle the non-breaching party to sue for actual damages incurred from the specific breach without terminating the entire contract.
• Seeking Remedies. The non-breaching party can seek various legal remedies, including:
• Damages. This is the most common remedy, which may include compensatory damages for losses directly resulting from the breach, consequential damages for additional losses caused by the breach, and sometimes punitive damages if the breach involved egregious behavior.
• Specific Performance. In some cases, especially when the subject of the contract is unique and monetary damages are insufficient, a court may order the breaching party to perform their obligations under the contract.
• Rescission. The contract can be canceled, and both parties are restored to their positions prior to the agreement, effectively undoing any exchange of goods, services, or monies that had occurred.
• Reformation. The contract can be rewritten to more accurately reflect the parties’ intentions if the breach resulted from a mutual mistake or misunderstanding.
• Mitigation of Damages. The non-breaching party is usually required to mitigate (i.e., minimize) their damages. This means taking reasonable steps to reduce the financial impact of the breach.
• Notification and Cure Period. Depending on the contract’s terms, the non-breaching party may need to notify the breaching party of the breach and possibly provide a chance to remedy the breach within a specified cure period.
• Litigation or Arbitration. If the breach cannot be resolved through negotiation or mediation, the matter may proceed to court, or to arbitration if the contract includes an arbitration clause, where a judge or arbitrator will determine the outcome.

Statute of Limitations. In Indiana, the statutes of limitations for contract claims vary depending on the nature of the contract involved. These statutes set the maximum time after an event within which legal proceedings may be initiated. For contracts in Indiana, the statutes of limitations are as follows:

• Written Contracts. The statute of limitations is ten years, as per Indiana Code § 34-11-2-11. This applies to contracts that are made in writing.
• Contracts for the Payment of Money. For contracts that specifically involve the payment of money, the statute of limitations is six years, according to Indiana Code § 34-11-2-9. This is a subset of written contracts but is highlighted due to its common occurrence in legal disputes.
• Oral Contracts. If the contract is oral, the statute of limitations is six years, as stipulated by Indiana Code § 34-11-2-7. Oral agreements, despite not being documented in writing, are subject to this specific time frame for legal action.
• Employment Agreements. Employment agreements have a shorter statute of limitations of two years, as detailed in Indiana Code § 34-11-2-1.

When Is A Contract Breach Serious Enough to Justify Termination of a Contract in Indiana?

In Indiana, as in many jurisdictions, whether a breach of contract is serious enough to justify the termination of the contract depends on whether the breach is considered “material” or “minor.” This distinction is crucial for determining the rights and remedies available to the non-breaching party, including whether they can terminate the contract altogether or must seek other forms of remedy.

What Is A Material Breach of a Contract?

A material breach is a failure to perform a part of the contracted agreement that is so fundamental that it undermines the entire purpose of the contract. It is serious enough to warrant the non-breaching party terminating the contract and seeking damages for the breach. The determination of a breach as material involves considering factors such as:

• The extent to which the non-breaching party is deprived of the benefits they reasonably expected under the contract.
• The extent to which the non-breaching party can be adequately compensated for the part of the benefit of which they were deprived.
• The extent to which the breaching party will suffer forfeiture.
• The likelihood that the breaching party will cure their failure, taking into account any reasonable assurances.
• The extent to which the behavior of the breaching party comports with standards of good faith and fair dealing.

What Is A Minor Contract Breach?

A minor breach (also known as a partial breach) occurs when the infraction does not substantially harm the value of a contract or its purpose. In cases of minor breach, the non-breaching party may not terminate the contract but can still seek damages for the specific harm caused by the breach.

Specifics in Indiana

In Indiana, the law requires assessing these and possibly other factors to determine the breach’s materiality. For example, if the breach involves a failure to pay on time, the court may consider how late the payment was and whether the delay significantly impacted the non-breaching party. If a contract explicitly states certain obligations as essential, a failure to meet those obligations is more likely to be considered a material breach.

Remedies and Actions

When faced with a material breach, the non-breaching party has the option to terminate the contract. However, it is often recommended that the non-breaching party formally notify the breaching party of the breach and the intention to terminate the contract, providing a clear record of the actions taken in response to the breach.

Before deciding on termination, parties should consider the potential for cure, the specific terms of the contract regarding breach and termination, and the breach’s overall impact on the contractual relationship. Because the determination of materiality can be complex and fact-specific, we encourage you to contact our office to schedule a consultation to see how the law may apply to your particular case.

Should A Breaching Party Be Given an Opportunity To Cure Or Remedy The Breach?

Giving the other party an opportunity to cure or remedy a breach is often a wise and pragmatic approach, particularly under Indiana law and general contract principles. Whether or not to allow for such an opportunity can depend on several factors, including the nature of the breach, the terms of the contract, and the relationship between the parties. The following are some considerations to keep in mind:

• Contractual Provisions. Many contracts include specific clauses that address remedies for breach, including conditions under which a breaching party has the right or the obligation to cure the breach. These clauses typically outline the process for notification of a breach and set a time frame within which the breaching party must remedy the issue. If the contract explicitly provides for a cure period, then following these terms is not only advisable but required.
• Nature of the Breach. The decision to allow an opportunity to cure should also consider the nature of the breach. If the breach is minor or the first instance of non-compliance, providing a chance to remedy the situation can maintain the business relationship and lead to a mutually beneficial resolution. For material breaches or a pattern of non-compliance, the decision becomes more complex and might warrant different considerations.
• Legal and Practical Benefits. Allowing for a cure period can have several benefits:

• Preservation of Relationship. Especially in ongoing business relationships, providing an opportunity to cure can preserve goodwill and maintain a working relationship.
• Mitigation of Damages. Allowing the breaching party to fix the breach can reduce the damages suffered by the non-breaching party and potentially avoid litigation.
• Legal Strategy. Should the dispute later go to court, having offered the opportunity to cure can reflect positively on the non-breaching party, demonstrating a reasonable and fair approach to resolving the dispute.
• Good Faith and Fair Dealing. Indiana’s legal framework does not universally apply the concept of an implied duty of good faith and fair dealing across all contract types. Rather, this duty is specifically acknowledged within certain contexts, such as employment and insurance contracts, along with other select scenarios where there’s a distinctive relationship between the parties involved.[1] This could include situations where one party holds a fiduciary duty or possesses a superior or special standing in relation to the other party.

Despite this nuanced application of the good faith principle, there remains a significant benefit in providing a counterparty with the chance to rectify or “cure” any breach of contract before pursuing legal remedies. Offering an opportunity to cure allows for the resolution of disputes in a manner that can preserve the business relationship, avoid the costs and uncertainties of litigation, and foster a cooperative rather than adversarial interaction. This approach not only aligns with the principles of fairness and efficiency but also supports the maintenance of goodwill and ongoing business relations between the parties.

If deciding to offer a cure, it’s essential to:

• Communicate Clearly. Notify the breaching party in writing of the breach and the opportunity to cure, specifying the breach’s nature, the expected remedy, and the deadline for curing the breach.
• Document Everything. Keep detailed records of all communications and actions taken to provide and manage the cure process.
• Consult Legal Advice. Given the complexities and legal implications, consulting with an attorney can help navigate the best approach to addressing the breach and utilizing the cure process.

What Is A No-Waiver Clause, And How Do I Determine If It Exists In A Contract?

A no-waiver clause is a provision in a contract that ensures that if one party chooses not to enforce a breach or violation of the contract’s terms by the other party, it does not mean that they waive (give up) their right to enforce the same term or any other term of the contract in the future. Essentially, it means that leniency or failure to insist on strict compliance with the contract terms on one occasion does not prevent a party from later requiring strict compliance.

Key Features of a No-Waiver Clause

• Prevention of Unintended Waivers. It helps prevent a party from unintentionally waiving their rights under the contract simply because they did not enforce it strictly at some point.
• Clarification on Rights and Obligations. It clarifies that the rights and obligations under the contract remain in effect despite occasional lapses in enforcement or temporary accommodations.
• Requirement for Written Waiver. Many no-waiver clauses specify that any waiver must be in writing and signed by the party granting the waiver, providing a clear and unambiguous record of any intention to waive any part of the contract.

How to Determine if a No-Waiver Clause Exists in a Contract

• Review the Contract. Look through the entire contract carefully. No-waiver clauses can sometimes be found in the general provisions or miscellaneous sections towards the end of the contract, but their location can vary.
• Look for Specific Language. No-waiver clauses usually contain specific language mentioning the concept of a “waiver” and may include terms such as “no waiver,” “waiver,” “enforceability,” “rights,” and “remedies.” The clause might read something like, “The failure by either party to enforce any rights under this agreement shall not be construed as a waiver of such rights, nor shall it affect the validity of this agreement.”
• Check for Variations. Understand that the language of no-waiver clauses can vary between contracts. Some might be very detailed, specifying the conditions under which waivers can occur, while others might be more broadly written.
• Consult the Definitions and Interpretation Sections. If the contract includes a definitions section or clauses regarding interpretation, review these as well. They might provide insights into how terms like “waiver” are defined within the context of the contract.
• Seek Legal Assistance. If you are unsure about the existence or interpretation of a no-waiver clause (or if the contract is particularly complex), it may be wise to consult with a legal professional. As contract attorneys with decades of experience, we can help you understand the specific provisions of your contract, including the implications of a no-waiver clause and how it might affect your rights and obligations.

Having a no-waiver clause in a contract is crucial because it provides flexibility and leniency in managing the contract without sacrificing the legal rights and protections it offers.

Has The Contract Been Properly Terminated?

Determining if a contract has been properly terminated involves a review of the contract terms, the actions taken by the parties, and applicable laws. Proper termination of a contract ensures that the termination is legally effective and minimizes the risk of future disputes over whether the contract is still in force. Here are steps to assess if a contract has been properly terminated:

Review the Contract Terms

• Termination Clauses: Many contracts include specific termination clauses that outline the conditions under which the contract may be terminated, the required notice period, and the method of notice (e.g., written notice).
• Breach Provisions: The contract might specify conditions under which a party can terminate the contract due to the other party’s breach. It may also provide for a cure period during which the breaching party can remedy the breach before termination becomes effective.
• Automatic Termination: Some contracts terminate automatically under certain conditions, such as the completion of the work or the occurrence of a specific event.

Follow Contractual Procedures for Termination

• Ensure that any required notice of termination is given according to the terms specified in the contract, including adhering to the correct format, timeline, and delivery method.
• If the contract allows for termination due to breach, verify that the breach has occurred, that it is material (if required by the contract), and that the breaching party has been given any required notice of breach, allowing them to cure the breach if applicable.

Mutual Agreement

• A contract can be terminated by mutual agreement of the parties. Such termination should ideally be documented in writing, specifying that both parties agree to end the contract and release each other from further obligations under the agreement.

Document the Termination

• Keep detailed records of the termination, including any correspondence and documentation related to the termination. This documentation can be crucial in the event of a dispute over whether the contract was properly terminated.

Consult with a Lawyer

• Because contract termination can have significant legal and financial implications, it is advisable to consult with a lawyer to ensure that the termination complies with the contract terms and applicable laws. As experienced contract breach attorneys, we can advise on the potential consequences of termination and how to mitigate any associated risks.

Assessment of Performance

• Evaluate whether all obligations up to the point of termination have been fulfilled. In some cases, obligations such as confidentiality agreements or paying for services rendered up to the termination date may survive termination.

Can Any of The Losses Be Mitigated?

Mitigating losses, also known as mitigation of damages, is a legal principle requiring parties in a breach of contract situation to take reasonable steps to minimize their damages. This concept is widely recognized in contract law across various jurisdictions, including Indiana. Here’s how to consider and approach mitigation in the context of contract breaches:

Understanding Mitigation of Damages

The duty to mitigate means that if you suffer a loss due to someone else’s breach of contract, you cannot simply let the damages pile up and then claim the total amount from the breaching party. Instead, you’re expected to make reasonable efforts to reduce or limit the damages.

How to Mitigate Losses

• Seeking Alternative Solutions. If a party fails to deliver goods or services as promised, the non-breaching party should look for alternative sources to fulfill their needs. For example, if a supplier fails to deliver goods, the buyer should attempt to find another supplier.
• Reducing Unnecessary Costs. If a project is halted due to the other party’s breach, the injured party should take steps to minimize ongoing expenses related to the project.
• Reselling or Repurposing Materials. If specific materials or goods were purchased for a contract that is now breached, the non-breaching party should attempt to sell or repurpose these materials to recover some of their costs.
• Documentation. Keep detailed records of all efforts and expenses related to mitigating the losses. This documentation can be crucial in proving that you have fulfilled your duty to mitigate if the matter goes to court.
• Professional Advice. In some situations, consulting with professionals, such as financial advisors or other industry experts, can help identify the best strategies for minimizing losses.

Legal Considerations

• Reasonableness. The law only requires reasonable efforts to mitigate damages. You are not expected to take extraordinary or excessively burdensome steps to reduce your losses.
• Impact on Damages Claim. Failure to mitigate damages can significantly impact the amount you can recover in a lawsuit. Courts may reduce the damages awarded by the amount that could have been avoided through reasonable mitigation efforts.
• Costs of Mitigation. Reasonable costs incurred in the process of mitigating damages can often be recovered from the breaching party. This includes costs associated with finding replacement goods or services.

While the general principles of mitigation apply, the specific application can vary based on the context of the breach and the type of contract involved. Indiana courts look at what a reasonable person in the non-breaching party’s position would do to mitigate the damages. The specifics of what is considered “reasonable” can depend on the industry standards, the nature of the contract, and the circumstances surrounding the breach.

How Can I Prove That a Contract Has Been Breached?

Proving a breach of contract and deciding whether to terminate the agreement are pivotal considerations in contract law that require careful analysis of the facts, the contract terms, and the potential consequences of termination.

Proving a Breach of Contract

To prove a breach of contract, you typically need to establish the following elements:

• Existence of a Valid Contract. Demonstrate that a legally binding agreement existed between the parties. This includes showing that the contract had all necessary elements: offer, acceptance, consideration, and mutual intent to enter into the agreement.
• Fulfillment of Your Obligations. Prove that you, as the alleging party, have fulfilled your obligations under the contract, or that you were excused from doing so.
• Other Party’s Failure to Perform. Show that the other party failed to perform their obligations as specified in the contract. This could involve failing to deliver goods or services, not paying on time, or otherwise not meeting the contract terms.
• Damages Resulting from the Breach. Provide evidence of the damages you suffered because of the breach. This could be financial losses, additional costs incurred, or other harms directly related to the failure to perform.

Documentation and Evidence

Supporting documentation is crucial for proving a breach of contract. This may include the contract itself, communications between the parties, receipts, records of transactions, and any other documents that demonstrate the breach and its impact.

Call Mattox & Wilson to Schedule A Consultation With An Experienced Contract Breach Attorney.

Facing a breach of contract can be daunting, but you’re not alone. At Mattox & Wilson, we can explain your legal options and help you find the best path forward. If you’re dealing with a breach of contract or have questions about your contractual rights and obligations, don’t hesitate to reach out to us. Our experienced contract lawyers are ready to assist you in protecting your interests and seeking a favorable resolution.

[1] Perron v. J.P. Morgan Chase Bank, N.A., 845 F.3d 852, 856 (7th Cir. 2017) (referencing Old Nat’l Bank v. Kelly, 31 N.E.3d 522, 531 (Ind. Ct. App. 2015); Paul v. Home Bank SB, 953 N.E.2d 497, 504- 05 (Ind. Ct. App. 2011); Allison v. Union Hosp., Inc., 883 N.E.2d 113, 123 (Ind. Ct. App. 2008)).