Five Elements of a Valid Contract
Florida law requires that for a contract to be valid, it must contain four essential elements:
- An offer;
- Acceptance;
- Consideration; and,
- Mutual consent.
More specifically, an agreement is formed when the terms requested by one party are accepted by the other, and the two parties mutually consent to the transaction.
For example, if one party seeks to purchase a lot of land for $10,000.00 and the owner of the lot agrees to sell the property to the purchasing party for that price, there is a valid agreement between the two parties . If the owner changes his or her mind later and refuses to sell the property for the requested price, the owner would likely be found to have breached the contract.
Of course, there are many ways to enter into a business or personal contract. Contracts may be written, verbal or may even be implied by the actions of the parties. When one party insists on going back on the terms offered to the other, this may result in a civil case under Florida contract law.
Defining a Breach of Contract
A breach of contract typically occurs when:
- (1) a party to the contract fails to perform his obligations under the contract;
- (2) performance is rendered impossible by the actions of another party to the contract; or
- (3) a party to the contract prevents another from fulfilling his obligations under the contract.
The Florida Supreme Court in Eastern Air Lines, Inc., v. Gulf Oil Corp., stated that:
A breach of contract exists when the promisor fails to do what he has agreed to do. Ordinarily, the breach may be either a minor or major breach. If it is a minor breach, the debtor is entitled to pay the smaller amount. If it is a major breach, then the debtor is required to pay the full amount.
In general, there are two classes of breaches of contract: material or major breaches and non-material or minor breaches. Dubai Trade Center v. Americare Health Begun, Inc.
Under the Restatement (Second) of Contracts, a minor breach is "one which does not substantially affect an essential element of the contract." Id. Conversely, a major or material breach is "a breach the effect of which is so serious that it overrides the interests of the parties in having the contract performed." Id.
In Collingsworth v. Freeport, I, Inc., the court explained that the term "material" and "minor" were to determined by the fact finder under the totality of the circumstances. The court stated that:
It would be better to avoid a conflict with the Restatement by saying that a material breach is one which goes to the essence of the contract, while a minor breach leaves the essence of the contract and the main undertaking parties unaffected….Whether a breach is material or minor is a question of fact.
Whether a breach of a contract by a party is a major or a minor breach depends on whether the breach is significant enough to defeat the purpose of the parties in making the contract. Id.
As a general rule, the measure of damages in a breach of contract action is the benefit of the bargain rule. If the breach is minor or partial, the parties will only be awarded the difference between what the contract promised and what the failed to do. If the breach is material, then the innocent party may be justified in terminating the contract without performance; however, the party may still choose to hold the breaching party accountable for damages caused by the breach.
Establishing a Breach of Contract in Florida
Before a Florida court will find a party liable for breach of contract, it must first determine that both parties are in agreement that a contract existed and that the contract was in fact breached. Many contracts are not put into writing. The Florida Bar explains: [An] agreement may be oral, written, implied or express. In order for a contract to be valid, there must be a "meeting of the minds" between the parties as to the terms and conditions relevant to the subject matter. Whether an agreement is valid, or whether its terms are as claimed by the plaintiff or the defendant, is a question (or questions) of fact to be determined by the fact finder. A plaintiff in a breach of contract case must show the following: Proving that a legally enforceable agreement exists and that it was breached is not enough. A plaintiff also bears the burden of establishing that the breach of contract resulted in damages. The Court commented on this in the case of Kelly v. Leon, 995 So.2d 1060 (Fla. 5th DCA 2008). The court held: In order to succeed on a breach of contract claim, a plaintiff must allege ‘the existence of a contract, including its essential terms, breach of the contract, and damages resulting from the breach.’ It is not necessary to allege consideration because it is presumed in this context. Portions of the contract may be pleaded pursuant to [Rule 1.110(d)]. Plaintiffs in a breach of contract case are not required to prove up every detail of the contract that was breached. A disputed contract will not, by itself, defeat a breach of contract claim. If the agreement is oral, its terms may be established through witness testimony. When a party to a contract breaches an agreement, all parties involved are affected. In Florida, it is possible to sue for breach of contract in civil court. The outcome of one breach of contract suit can have a ripple effect across several parties.
Defenses to Breach of Contract Claims
Common defenses to a breach of contract claim include the statute of limitations (i.e. that the claim was filed after the expiration of the statute of limitations period), consent (i.e. that the parties consented to a modification of the contract, and/or that the performance was accepted), duress, unconscionability, mistake, incapacity of a party to comply with the contract requirements, impossibility and impracticability of performance and novation.
Statute of Limitations: Actions for breach of written contracts must be commenced within five years, while an action based on an oral contract must be brought within four years. If the contract contains a written demand provision, it is possible that the action may need to be brought within three years.
Consent: A claim for breach of contract will fail where the other party gives its consent to the breach. Consent can be express or implied. The giving of consent, however, does not permit the party giving consent to agree to a contract contrary to the law or public policy.
Duress: Where a party is compelled to enter into a contract by another’s wrongful conduct, and such conduct, if not resisted would cause illness or severe bodily harm to the other, the contract made under duress will be invalid.
Unconscionability: A court may use its discretion to deny enforcement of an agreement where the provision is so grossly unfair as to be "oppressive". Unconscionable clauses may be held by the court to be effectively void or unenforceable, even if they are not a total negation of the assent of the party receiving its benefit. Courts tend to use this power with caution.
Mistake: Some contracts are held invalid when under mutual mistake as to material facts , if the mistake causes prejudice to one of the parties. No relief, however, will be given when it appears that a mistake has been induced or is the result of negligence, or when relief may be obtained by reforming the instrument.
Incapacity: A contract is void against one who is incapable of giving a legal consent to it. The law does not permit one incapable of understanding what he is doing to alter his legal relations by any promise or act however plainly couched in ordinary language. The law cannot tolerate a wrong inflicted intentionally, or as the consequence of culpable negligence.
In Impossibility of Performance and Impracticability of Performance: If the parties have not allocated the risk of a supervening impossibility to perform, a contract will be deemed discharged when an unforeseen event makes such performance impracticable or impossible. Such unforeseen events must be of a nature that make impractical or impossible the performance of the duties normally devolving upon the debtor. Material changes in the cost of performance rarely afford an excuse under the impossibility of performance doctrine. Examples of events falling under the doctrine include fire, flood, earthquake, death of parties and destruction of the subject matter. An intervening situation making performance impossible after the time for performance has passed, as in a fire after the barge has already broken up and all hands have been lost, will not excuse the failure to carry out an offer to buy or sell Gods ban which has been accepted.
Novation: Novation is the substitution of a new obligation for an existing one. A new contract between the parties is entered into and the performance under the new contract completely satisfies the obligations of the original contract.
Remedies for Breach of Contract
In Florida, there are four forms of legal remedies that a Court may award for a breach of a contract: monetary damages, specific performance, rescission, and reformation.
- Monetary Damages: Florida allows for the recovery of four types of monetary damages for breach of contract: lost profits, amounts paid in reliance on the contract, the cost of substitute performance (if any), and consequential damages. In seeking monetary damages, you must be able to show that: the contract existed; the contract was breached by the defendant; you suffered damages as a result of the breach; and, your failure to perform was excused. Generally, damages are not recoverable for loss sustained in a contract when it is not possible to prove with reasonable certainty that the loss occurred or that the claimant is not only fortunate but also directly and proximately interested in the discovery.
- Specific Performance: Specific performance is just an order of the Court requiring a party to perform his or her obligation under a contract. Specific performance is a powerful remedy because it does not give the non-breaching party any choice. There are a few common situations in which Florida Courts have found that specific performance is an appropriate solution: real property sale contracts, where the subject of the contract is unique; distinctive art or antiques; and executory contracts for the sale of a business.
- Rescission. Rescission is the equivalent of ending a contract and creating the fiction that the contract never existed between the parties. Rescission is appropriate where the agreement was based on faulty assumptions of fact or contract provisions that have become impossible to perform.
- Reformation: Florida also recognizes the equitable remedy of reformation. Reformation is used to remedy a mutual mistake, unilateral mistake, or an incomplete contract.
Florida Law and Breaches
Florida’s breach of contract law does differ from other states in that Florida’s commercial statutes set statutes of limitations on certain commercial contracts. For instance, a claim for breach of a lease agreement must be brought within five years while an action for breach of a contract not executed under seal must be brought within four years after the cause of action accrues. A breach of a promissory note must be brought within six years. Compare that to states like New York (where the statute of limitation for breach of any written contract is six years) in which Florida has a much shorter time frame.
In addition to the above, in Florida , a breach of a written lease agreement has a statute of limitations of five years. See Florida Statute § 95.11(2)(d). An action for a written contract that is not sealed is limited to four years after the cause of action is accrued (See Fla. Stat. § 95.11(3)). With respect to a non-written contract, the statute of limitations is four years as well. See Fla. Stat. § 95.11(2).
For example, if you have a three year statute of limitation, the last modification argument or the discovery argument (both discussed above) are crucial to your case. In Florida, for a three year statute of limitation, you’d only have to prove that the breach could not reasonably have been discovered until late in the three-year period, and the breach did occur within the three years prior. If you miss the time period in bringing such claims, you will be barred by the statute of limitations.
