Category Archives: breach of contract

CONTINUING BREACH DOCTRINE

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Have you ever heard of the “continuing breach” doctrine?  Probably not.  It is not a doctrine commonly discussed. It’s a doctrine used to try to argue around the statute of limitations.

In an older Southern District Court of Florida case, Allapattah Services, Inc. v. Exxon Corp., 188 F.R.Ed. 667, 679 (S.D.Fla. 1999), the court explained: “Under this [continuing breach] doctrine, a cause of action for breach of a contract does not begin to accrue upon the initial breach; rather, on contracts providing serial performance by the parties, accrual of a breach of contract cause of action commences upon the occurrence of the last breach or upon termination of the contract.”

Recently, this doctrine came up in an opinion by Florida’s Fifth District Court of Appeal.  In Hernando County, Florida v. Hernando County Fair Association, Inc., 49 Fla.L.Weekly D947b (Fla. 5th DCA 2024), a plaintiff appealed the trial court’s dismissal with prejudice of its breach of contract claim based on the statute of limitations.  The plaintiff claimed the defendant breached the contract by its failure to substantially redevelop property. The trial court dismissed based on the statute of limitations. However, the complaint alleged the defendant’s failure to comply “with numerous other intertwined, ongoing, and continuing contractual duties and obligations.”  Hernando County, supra.   The Fifth District reversed based on the continuing breach doctrine: “Where the nature of the contract is continuous, statutes of limitations do not typically begin to run until termination of the entire contract.”  Id. quoting and citing Allapattah Servs., Inc.

This case is interesting because the continuing breach doctrine is not a doctrine that comes up a lot.  And when it does, it’s in the statute of limitations context.  Thus, because it was relied on by the Fifth District Court of Appeal in reversing a dismissal based on the statute of limitations, if you plead your case “right,” you may be able to plead it to survive a statute of limitations motion to dismiss under this doctrine.  Now, this does not mean the facts will play in your favor down the road.  But, it does mean you’ll live to fight the factual fight and you’ll focus on evidence to support this factual fight, which is ultimately the objective in any dispute.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

FRAUD CLAIMS AND BREACH OF WARRANTY CLAIMS AGAINST MANUFACTURER

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A recent case touches upon two issues that are noteworthy when considering fraud claims and breach of warranty claims against a manufacturer. Below contains a discussion on these claims.

Independent Tort Doctrine

“Florida’s independent tort doctrine provides that a party may not recover in tort for a contract dispute unless the tort is independent of any breach of contract.” MidAmerica C2L Inc. v. Siemens Energy, Inc., 2024 WL 414620, *6 (M.D.Fla. 2024).  This means tort allegations and claims MUST be separate and distinct from performance under the contract. Id. (citation omitted).

In MidAmerica C2L, a plaintiff sued a manufacturer relating to sophisticated equipment for a coal gasification plant. The parties entered into different agreements for the equipment and a license where the plaintiff could use the manufacturer’s patented technology for its coal gasification plants. A dispute arose and the plaintiff sued the manufacturer under various legal theories.  The manufacturer moved for summary judgment.

Two claims asserted against the manufacturer were grounded in fraudulent misrepresentation theories dealing with monetary damages and rescission of the contract. Both claims dealt with allegations that the manufacturer knew of defects in its equipment, had superior knowledge of the defects, had a duty to disclose the defects, and failed to do so. However, both fraud claims were a restatement of the SAME facts supporting the plaintiff’s breach of contract claims against the manufacturer. The trial court dismissed these claims because of the independent tort doctrine as the same material facts alleged in the fraud claims were alleged in the breach of contract claims.

Rescission

The trial court further found that the plaintiff’s request for rescission was not proper because “[the plaintiff] does not argue, much less demonstrate, that legal remedies are inadequate” to support the equitable relief of rescission.  MidAmerica C2L, supra, at *6.  The plaintiff attempted to counter by arguing that recission should be warranted because there was a lack of consideration for the contracts. This, however, was shot down because “Florida does not recognize the [equitable] claim of recission based on lack of consideration.” MidAmerica C2L, supra, at *7.  Florida law would recognize damages if there was a failure of consideration. Id. (citation omitted).

Breach of Warranty

Additionally, there was a worthwhile discussion on the plaintiff’s claim for breach of warranty of fitness for particular purpose against the manufacturer.  Although New York (not Florida) law governed this claim, it is still an important discussion for consideration, particularly since the analysis would be analogous under numerous jurisdictions.

The contract, as common, contained a warranty disclaimer which included a disclaimer for breach of the implied warranty of fitness for a particular purpose.

The elements for breach of implied warranty of fitness for a particular purpose are: (1) the seller, at the time of contracting, has reason to know the particular purpose for which the goods are required, (2) the seller has reason to know that the buyer is relying on the seller’s skill and judgment to select suitable goods for the specified purpose, and (3) the buyer did in fact rely on that skill or judgment. That said, a written disclaimer of a warranty of fitness for purpose precludes a party from relying on a representation that is specifically disclaimed in the agreement.

MidAmerica C2L, supra, at *3.

The warranty disclaimer should put the kibosh on this claim, right?  Well, the plaintiff argued that the warranty disclaimer is unconscionable and, thus, should be waived.  Under New York law, to argue unconscionability, the plaintiff must show the contract is both procedurally and substantively unconscionable when the contract was made. MidAmerica C2L, supra, at *4 (citation omitted). Regarding both procedural and substantive unconscionability, the court explained:

“[P]rocedural unconscionability considers whether there has been a lack of meaningful choice to accept a challenged provision by evaluating anumber of factors, including ‘(1) the size and commercial setting of the transaction; (2) whether there was a lack of meaningful choice by theparty claiming unconscionability; (3) the experience and education of the party claiming unconscionability; and (4) whether there was disparity inbargaining power.’ ” “[S]ubstantive unconscionability involves an analysis ‘of the substance of the bargain to determine whether the terms wereunreasonably favorable to the party against whom unconscionability is urged.’ ” “Procedural and substantive unconscionability have been described asoperating on a ‘sliding scale,’ meaning that ‘the more questionable the meaningfulness of choice, the less imbalance in a contract’s terms should be tolerated and vice versa.’ ”

MidAmerica C2L, supra, at *4 (internal citations omitted).

Regardless of the plaintiff’s unconscionability argument, the trial court still dismissed the claim.  The court found that this argument was simply based on the allegation that the manufacturer preyed on the plaintiff’s lack of bargaining power.  Besides, the plaintiff failed to identify any record evidence to remotely support its theory of unconscionability. “The Court finds that [the plaintiff] failed to plead unconscionability in the [complaint], and even if it had preserved this theory of recovery, there is no genuine issue of material fact relating to the applicability of the [warranty] disclaimer and the lack of unconscionability.” MidAmerica C2L, supra, at *5.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

BREACH OF AN ORAL CONTRACT AND UNJUST ENRICHMENT AND IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING

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In an ideal world, parties would have written contracts.  In reality, parties should endeavor to ensure every transaction they enter into is memorialized in a written contract.  This should not be disputed.  Of course, written contracts are not always the case. Parties enter transactions too often whereby the transaction is not memorialized in a clean written agreement.  Rather, it is piecemealing invoices, or texts, or discussions, or proposals and the course of business. A contract can still exist in this context but it is likely an oral contract.  Keep in mind if there is a dispute, what you think the oral contract says will invariably be different than what the other party believes the oral contract says. This “he said she said” scenario gets removed, for the most part, with a written contract that memorializes the written terms, conditions, and scope.

A recent federal district court opinion dealt with the alleged breach of an oral contract. In Movie Prop Rentals LLC vs. The Kingdom of God Global Church, 2023 WL 8275922 (S.D.Fla. 2023), a dispute concerned the fabrication and installation of a complex, modular stage prop to be used for an event. But here lies the problem. The dispute was based on an oral contract and invoices. The plaintiff, the party that was fabricating the modular stage prop, sued the defendant, the party that ordered the stage prop for the event, for non-payment under various claims.  The defendant countersued under various claims.

The trial court analyzed a motion for summary judgment relating to the defendant’s breach of oral contract claim against the plaintiff. Each party claimed a different fixed price term for the transaction. The trial court found that while the parties disputed the fixed price amount, and whether there were fixed installment payments, it was undisputed that an oral contract existed for a fixed price with money being exchanged for the fabrication of the stage prop, and within a specific duration, as consideration. However, the trial court found that whether the payments were to be installment payments were not an essential term when “it is undisputed that the Oral Contract contains a specified price, a specific duration, and a defined scope of work to be performed.” Move Prop Rentals, supra, at *6.

Because of the oral contract, the trial court granted summary judgment as to an unjust enrichment claim. “As noted, Defendants rely on their payments under the Oral Contract to support their unjust enrichment claim. That fact is fatal to their unjust enrichment claims, as [a]ny proof of an express agreement between the parties as to the compensation to be paid for the services rendered…defeat[s] rather than sustain[s] an action based upon quantum meruit.” Movie Prop Rentals, supra, at *8 (internal quotations and citation omitted). Stated differently, the oral contract precluded the unjust enrichment claim.

Because of the oral contract, the trial court granted summary judgment as to a breach of an implied duty of good faith and fair dealing claim.

Where a party to a contract has in good faith performed the express terms of the contract, an action for breach of the implied covenant of good faith will not lie. Accordingly, a cause of action for breach of the implied covenant cannot be maintained (a) in derogation of the express terms of the underlying contract or (b) in the absence of breach of an express term of the underlying contract.

Movie Prop Rentals, supra, at *8 (internal quotations and citation omitted).

Here, the trial court found that the breach of implied covenant of good faith and fair dealing was in derogation of the express terms of the oral contract because it was based on the plaintiff’s failure to fabricate in exchange for payment:

Defendants content that the Oral Contract obligated Plaintiffs to fabricate the Stage Prop in exchange for Defendants’ installment payments, contingent on Plaintiffs’ status updates. Defendants’ breach of the Oral Contract claim is based on Plaintiffs breach of this express term rather than on an implied duty to perform in good faith. Plaintiff’s failure to fully perform either constitutes a breach of this express term, or, should Plaintiff prevail on their breach of contract claim, Plaintiff’s partial performance does not constitute a breach in light of Defendants’ failure to continue making payments.

Movie Prop Rentals, supra, at *8.

Could this dispute have been avoided with a written contract? Maybe. Maybe not.  However, one thing is clear.  A written contract would have memorialized terms and conditions and each of the parties’ expectations under the contract as it relates to payment and work progress.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

VOLUNTARY PAYMENTS AFFIRMATIVE DEFENSE DOES NOT APPLY IN CONTRACT CASES

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In certain matters, there is an affirmative defense referred to as the “voluntary payments” defense. This defense states, “where one makes a payment of any sum under a claim of right with knowledge of the facts such a payment is voluntary and cannot be recovered.” Avatar Properties, Inc. v. Gundel, 48 Fla.L.Weekly D1272c (Fla. 6th DCA 2023) quoting City of Miami v. Keton, 115 So.2d 547, 551 (Fla. 1959).  This voluntary payments defense could be construed as a “gotcha” defense, right? Unfair!  You voluntarily made the payment with knowledge of the facts; therefore, you are s**t out of luck when it comes to recovering the potentially wrongful payment.

Well, guess what?  This voluntary payments affirmative defense does NOT apply in contract disputes. This is codified by Florida Statute s. 725.04 which states: “When a suit is instituted by a party to a contract to recover a payment made pursuant to the contract and by the terms of the contract there was no enforceable obligation to make the payment or the making of the payment was excused, the defense of voluntary payment may not be interposed by the person receiving payment to defeat recovery of the payment.”  Fla.Stat. s. 725.04. See also Avatar Properties, supra (explaining voluntary payment defense does not apply in contract cases and even in non-contract cases it doesn’t apply if payment made under coercion or compulsion).

Thus, if you wrongfully make a payment that you were not required to make under a contract, you are not s**t out of luck when it comes to legally pursuing the recovery of this payment.  The voluntary payments affidavit defense does not apply to bar the claim. In contract disputes, you shouldn’t rely on this defense and you should be cautious about asserting it.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

FOR BREACH OF CONTRACT CLAIM, THERE NEEDS TO BE A BREACH OF A CONTRACTUAL DUTY

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Remember this law (and I mean: remember this law!):

“An essential element of a claim for breach of contract is the existence of a material breach of a contractual duty.”  JD Development I, LLC v. ICS Contractors, LLC, 2022 WL 4587083, *3 (Fla. 2d DCA 2022) (citation and quotation omitted).

This law is important because how can another party breach of a contract if there is no contractual duty you claim they breached?  This question, and, of course, the answer, should not be overlooked from a strategic standpoint because it may dictate what claims you assert, how you assert those claims, and how you present your case from a theme and evidentiary standpoint.

JD Development provides an example of why this law is important and how this can play out.

In this case, a site contractor’s written bid formed the parties’ contract.  The site contractor sued the owner for non-payment of work it performed under the bid.  The owner claimed that the alleged unpaid invoices did not fall within the scope of the work in the bid; therefore, the trial court should have granted a directed verdict in favor of the owner on the contractor’s breach of contract claim.  The appellate court agreed!

The site contractor’s bid was a unit cost bid made up of 8 work categories and included exclusions in a notes section that were not included in its bid price.  The owner accepted the bid.  The site contractor performed 3 of the 8 categories in its bid and then was terminated. The site contractor claimed it was owed in excess of $100,000.  This amount represented additional work the site contractor testified it was asked to perform based on site plan revisions.  “No testimony was elicited during direct examination connecting the work activities set forth in the disputed invoices to any express provision of the bid.”  JD Development, supra, at *2.

The owner moved for directed verdict stating the contractor “failed to present any evidence establishing that the work activities identified in the disputed invoices correlated to any express provision of the bid.” JD Development, supra, at *3.  The contractor argued that the unpaid work was contemplated by the exclusions in the bid.  For this reason, the trial court denied the motion for directed verdict.  The jury returned a verdict in favor of the contractor finding that the owner breached the contract.

As mentioned above, the appellate court agreed that the trial court should have granted the directed verdict. Here is why:

It is undisputed that none of the work activities set forth in the unpaid invoices fell within the scope of the three work categories of the bid actually completed by [the site contractor] prior to termination…Finally, [the site contractor’s] testimony that the activities referenced in the disputed invoices fell within the express exclusions in the “Notes”  section of the bid actually supports [the owner’s] position: if the work activities referenced in the disputed invoices are of the type that was expressly excluded from the bid, then clearly the bid did not reflect an agreement as to the performance of—and payment for—those work activities. Stated differently, the bid did not require [the site contractor] to perform those work activities and in turn it did not require [the owner] to compensate [the site contractor] for performing those work activities. Whether the parties may have orally agreed to the performance of those work activities or whether a written document other than the bid reflects the parties’ agreement as to the performance of those work activities has no bearing on whether the trial court properly denied the motion for directed verdict on the breach of contract claim. [The site contractor] pleaded a claim for beach of the written bid and proceeded under that legal theory at trial.  And since no reasonable view of the evidence could sustain a verdict in favor of [the site contractor] on its breach of contract claim—even when viewing testimony and evidence in the light most favorable to [the site contractor]—we hold that the trial court erred in denying [the site contractor’s] motion for directed verdict with respect to this claim.

JD Development, supra, at *3.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.