Did you make a contract with someone and now they are not following the terms of the agreement? In this article, we review what to do when someone breaks a contract or "breaches a contract."
Here is a summary:
- Review the contract or the agreement.
- How much have you lost as a result of the contract being broken?
- Reach out to the person who broke the contract.
- Think about going to mediation.
- Sue them in small claims court for the money owed to you.
Review the contract or the agreement
The first step in deciding what to do when someone breaks a contract is to review the contract. You will want to print out the contract and read it front to back.
What to look for when you are reviewing a contract:
- What were you supposed to do under the contract?
For example, were you supposed to pay for work to be completed? Were you supposed to purchase paint before the painters could get to work? Make sure you write down what you were supposed to do under the contract.
- Did you do what you were supposed to do under the contract?
Now that you know what was required of you under the contract, did you do what you were supposed to do per the contract? Take pictures, gather receipts, and look for any evidence that demonstrates that you did what the contract required you to do.
- What was the other person supposed to do under the contract?
Now outline what the other person was supposed to do under the contract. For example, were they supposed to pay you for work you completed at certain milestones?
- Did the other person do what they were supposed to do under the contract?
Here is where you are outlining what the "breach" of the contract is. What was the person supposed to do under the contract and what did the person do instead? Take pictures, gather receipts, and look for any evidence that demonstrates that the other person didn't do what they agreed to do under the contract. For example, if you submitted your work and the other person who had agreed to pay you didn't pay you, they didn't do what they were supposed to do under the contract.
- What are the money terms?
For example, how much were you supposed to get paid for the work you did?
- What dates are involved?
For example, were there any deadlines included in the contract? Were the deadlines met?
- Any other important terms in the contract?
Review the contract in detail to determine if there are any terms that mention what to do in the event of a dispute. Some contracts have terms that you have to first try to mediate before suing or have mandatory arbitration clauses.
- What happens if the contract is not in writing?
A contract does not need to be in writing for it to be enforceable. If you and someone else came to an agreement verbally, that is still a contract. Make sure to write down or save any information that relates to the verbal agreement.
Calculate how much you have lost as a result of the contract being broken
As a result of the contract being broken, how much have you lost? This is known as "your damages."
Here are some examples:
- You agreed to lend someone money, but they don't pay you back. Your damages may be the amount of money the person borrowed from you and any interest that has accrued.
- You agreed to work on building someone's website, but they don't pay you for your work. Your damages may be the amount of money they had promised to pay you for building the website.
- You agreed to pet sit someone's dog and didn't take on other clients, but they never dropped off their dog. Your damages may be the amount of money they would have paid you had they dropped off their dog.
Reach out to the person who broke the contract
When you think someone has broken the contract, the first thing to do may be to reach out to them to see what happened. Many times there may be a simple misunderstanding as to what was required of them under the contract.
Consider inviting the person who broke the contract to mediation
What is mediation?
Mediation is a meeting between you, the other person, and a neutral 3rd party called the mediator. A mediator is not going to force you and your friend to come to an agreement and is not going to determine who is right and who is wrong (that is what judges do). A mediator is going to help you and the other person come to an agreement together on how to resolve the breach of the contract. They are going to help you talk to each other without interruptions.
Benefits of mediation:
- The mediator will help you brainstorm solutions on how to move forward and fix the breach of the contract or pay you for the damages resulting from the breach.
- The mediator will make sure you are not talking over each other and that the conversation remains respectful.
- Sometimes having an outsider's perspective will help you see a situation differently.
- You may be able to be reach a resolution quicker than going to court especially if you and the other party to the contract come up with ways to fix the breach of the contract or come up with a payment plan to pay you for damages.
- Mediation tends to be very successful between people who have a longstanding relationship and a relationship that will likely continue for the foreseeable future. If your contract was with someone you hope to have a contract with in the future, mediation is a good option.
How can I try to mediate the breach of contract dispute?
In California, there are many organizations that provide free or low-cost mediation. Run a google search for "mediation near me" and you will find one of the many organizations providing mediation. Many times they are run by volunteer mediators.
Many California small claims courts also have free mediation available. Each county runs their small claims mediation a bit differently so reach out to us for more information on your court. You can either obtain free mediation on your hearing date or you may be able to request mediation before your hearing date.
Consider suing them in small claims court
Really often we get the question, well can I sue someone for breaking a contract in small claims? The answer is yes, so long as you want to sue for $10,000 or less as that is the small claims limit in California.
Here are some examples of common small claims lawsuits relating to broken contracts:
- You agreed to work on a project for a company. They promised to pay you on an hourly basis or based on work you submitted to them. You submitted the work but they never paid you. You can sue them in small claims court for the money owed to you.
- You lent your ex-boyfriend money for bills, rent, food, and gas. They promised to repay you in a few months once they received their first paycheck. Months passed and they keep saying they will pay you back next month. You decide to sue them in small claims court for all the money you sent them via Venmo.
- Your friend borrowed money for you to pay a security deposit on a new apartment they were renting. They promised to pay you back as soon as they got their security deposit back from the old unit they were renting. It has been 6 months and you have not heard back from your friend. You decide to sue them in small claims court for the money they borrowed from you.
- You lent your co-worker money to buy a car. They promised to pay you back, but they show up to work every day and they are ignoring your requests to get repaid. You decide to sue them in small claims for the money you lent them for the car.
Going to small claims court can be a hard decision when you have long history of working together or when you expect to work together in the future. However, sometimes you are left with no other option if you want to get your money back.