March 26, 2020

By: Richard P. Green

We’ve all heard it.  If you want something from someone… “get it writing”.  The simple idea is that if you get it in writing, then you have proof of their responsibility in case the other party breaches the contract.  However, this idea of having a contract to memorialize an agreement between parties has seemingly morphed into a misunderstanding of exactly what the parties to a contract are bargaining for.  People believe that if they have a contract, then the other party actually cannot breach the contract at all,  as if breaching the contract is akin to committing a crime.  Or, if the other party does breach the contract, that a lawsuit to recover damages will be simple and straightforward.  After all, the agreement is in writing.  Unfortunately, neither of those beliefs is necessarily true.  Please do not mistake me, having a contract is essential to good business practice.  But it is equally important to understand the purpose of a contract.

What to expect in a Breach of Contract Lawsuit

The basic elements of an enforceable contract are offer, acceptance, consideration, and sufficient specification of essential terms.[1]  To recover for breach of contract, a claimant must demonstrate (1) the existence of a valid contract; (2) a material breach; and (3) that it suffered damages.[2]  These standards taken together mean that the contract is not dispositive of a disagreement between the parties, but rather is evidence for the parties to use to persuade a judge or jury that their position in the lawsuit is correct.  Generally, in resolving a breach of contract lawsuit, the Court will only apply the plain meaning of the contract itself, and not consider other information, in order to understand the meaning and purpose of the contract.[3]  Hence, a well written contract is essential to proving a party’s case.  Nevertheless, it is incumbent upon the parties to a lawsuit to provide enough evidence, not only the contract, to prove they are entitled to damages or that they are not liable for a breach of the contract.

Perspective in Drafting a Contract

Because breach of contract lawsuits can be very fact intensive despite there being a written document detailing the relationship of the parties, it is important to not think of contract drafting as only “memorializing the agreement”.  The perspective should be “how will this contract protect my interest if the agreement falls apart.”  So often people use terms like “airtight” and “solid” to explain a contract they’ve written.  These people have clearly never encountered a competent litigator.  They also have no frame of reference of how long a simple breach of contract will last before it ever makes it to trial.  This is why it is imperative for people to not only draft a contract which anticipates the needs of the party but also make sure all relevant evidence for the duration of the contract is maintained.  Focusing on what a party needs in a contract to ensure their stake is protected is the most important aspect of a contract.

For example, for years I litigated collection matters where the bank sought to collect on an unpaid credit card from a consumer.  Every now and again a savvy consumer would find ways to delay the case for months or even years.  The devil was in the details…of the credit card agreement.  One of those provisions was the provision on arbitration.  Arbitration is preferred by many large corporations because large corporations are often the bad guys to a jury.  Understanding this, banks put the arbitration provision in their agreements in the event a consumer sued them for some issue that could arise in using the credit card.  But the bank was subject to that trick as well.  Although arbitration provides a forum without the unpredictability of a jury, it is also several times more expensive.  Collection cases are about minimizing expense.  Although the bank should have the arbitration provision to protect itself, that provision made it difficult in many cases to obtain a judgment on something as simple as a delinquent credit card account.  What the bank needed in order to protect its interest in bringing collection lawsuits was a caveat in their agreement excluding collection lawsuits from the arbitration provision.  Something that simple would have saved the bank a great deal of time, resources, and money.

Five Things Every Contract Should Address

1. Payment and Services – This is the subject of all contracts. Someone is providing a good or service in exchange for money.  What should be included are all services or goods to be delivered and, to the extent feasible, what is included in those services and what is not included in those services.  Payment should be as detailed as possible.  If periodic payments, indicate when they are scheduled to be made and through what method.  Is there any retainage to be held and paid at the end of the contract period?  If so, what is the retainage for exactly?  These are the typical contract negotiations — how to get the deal done.
2. Reference to Anything Not Included in the Contract Document – Often there are documents, plans, materials, and other things which are not technically a part of a contract. They may be attached to the contract or identified as existing in a particular location.  What is important is that the document referenced in the contract is specifically identified and there is an explanation as to what is included in that document.  For example, often a real estate contract will be for a home that is subject to a Home Owner’s Association (“HOA”).  The HOA has a set of documents which will impact the buyer but are not necessarily part of the real estate contract itself.  It is important for the real estate contract to specifically name of the HOA documents as well as a short description as to what they are or how they affect the buyer.  This is particularly important because documents which may have importance for a lawsuit and which are attached to a pleading in the lawsuit will control over allegations in the pleading.[4]  This means that if a party desires a document to be a part of the contract, it is imperative that there be no ambiguity as to what document they are referencing.
3. Amendments to the Contract – For any contract relationship that will last for a significant period of time, changes happen.  In construction, owners will want to make changes to the plans or contractors will discover problems that render the original plans impossible.  This is normal.  What is abnormal are parties who properly document these changes.  Amendments should come before there is a deviation from the contract.  If an owner wants something different than what was originally bargained for, the owner needs to have that change in the plans made, a price quoted, and that amendment signed by both parties.  Relying on emails, or conversations on the job rarely, if ever, succeed in court.  Contractors who need a change in the plans, especially if that change results in a higher overall contract price, need that change specifically identified and the owner to sign off on that change prior to doing any work under that change order.  Understanding that this could cause a delay, and time is money, it is nevertheless imperative to obtain a signature from the owner to that change in order for the contractor’s interest to be fully protected.
4. Parties to be Bound to the Contract – This may seem obvious, but only the party that signs the contract can be bound by it. This is extremely important for small businesses who contract with consumers for services such as landscaping or other simple projects.  It may seem that the individual person that the small business is negotiating with is the consumer who should sign the contract, however, if the individual is acting on behalf of a business or trust, then that individual needs to sign on behalf of the business.  Another example is ensuring that any work performed which benefits real property is contracted for and with the record owner(s) of the property.  If the owner of a property is a trust or individual who does not have the capacity to contract, and thus has a trustee or power of attorney, the person signing the contract on the owner’s behalf needs to sign in that specific capacity.  Signing in their personal capacity may render the contract unenforceable.
5. Attorney’s Fee Provision – In Florida, parties in a lawsuit bear their own costs and attorneys’ fees unless otherwise stated in the Florida Statutes or a contract.[5]  A contract that does not have an attorney’s fees provision may be a problem for many parties because it may not be cost efficient to file a lawsuit against another party for breach of contract.  The costs incurred in litigation, as well as the fees for a lawyer to pursue a claim may often be more expensive than the claim itself.  Conversely, for parties who may be prone to meritless lawsuits, making sure there is no attorney’s fee provision is a way to discourage such lawsuits.  In either case, it is important to consider the issue before signing a contract.

It is extremely important and good business practice to memorialize all agreements into a contract.  Contracts are meant to protect the interests of the parties to the contract.  It is equally important to remember that contracts are enforced in litigation.  Accordingly, they should be drafted from the perspective of how they will be used in litigation.  If you have any questions or need assistance in creating or reviewing a contract, please contract Richard P. Green with Lewis, Longman & Walker, P.A., St. Petersburg.  Richard P. Green can be reached at 727-245-0820 or online at rgreen@llw-law.com.

[1] Jericho All-Weather Opportunity Fund, LP v. Pier Seventeen Marina and Yacht Club, LLC, 207 So. 3d 938, 941 (Fla. 4th DCA 2016).

[2] Friedman v. New York Life Ins. Co., 985 So. 2d 56, 58 (Fla. 4th DCA 2008).

[3] Emergency Assocs. of Tampa v. Sassano, 664 So.2d 1000, 1003 (Fla. 2d DCA 1995).

[4] BAC Funding Consortium Inc. ISAOA/ATIMA v. Jean-Jacques, 28 So. 3d 936, 938 (Fla. 2d DCA 2010).

[5] Sarkis v. Allstate Ins. Co., 863 So.2d 210, 215 (Fla. 2003).