Contract Basics FAQ

A breach of contract under California law occurs when one party to a valid, enforceable agreement fails to perform their contractual obligations without a legal excuse. California Civil Code Section 3300 provides the foundation for breach of contract claims, establishing that damages may be recovered for detriment proximately caused by the breach. To establish a breach, the non-breaching party must demonstrate four essential elements: the existence of a valid contract, the plaintiff's performance or excuse for nonperformance, the defendant's breach of the contract, and resulting damages.

California courts recognize that a breach can occur through complete failure to perform, partial performance, defective performance, or anticipatory repudiation where one party clearly indicates they will not fulfill their obligations. The severity and nature of the breach determines the available remedies, ranging from monetary damages to contract rescission.

California law recognizes several distinct types of contract breaches, each with different legal implications. A material breach is a substantial failure to perform that goes to the essence of the contract, allowing the non-breaching party to terminate the agreement and seek full damages. A minor or partial breach involves incomplete performance that does not defeat the contract's purpose; the non-breaching party must continue performance but can recover damages for the deficiency.

An anticipatory breach occurs when one party unequivocally communicates their intention not to perform before performance is due, allowing the other party to immediately pursue remedies under California Civil Code Section 1440. A fundamental breach destroys the entire basis of the agreement, entitling the injured party to rescind and seek restitution. California courts analyze the totality of circumstances, including the breaching party's conduct and the impact on the innocent party's expected benefits, to classify the breach type.

To prevail in a breach of contract action in California, a plaintiff must prove four essential elements by a preponderance of the evidence:

1. Existence of a valid contract between the parties, which requires offer, acceptance, consideration, and mutual assent to the material terms.
2. Plaintiff's performance of their contractual obligations or a valid excuse for nonperformance, such as impossibility or the defendant's prior breach.
3. Defendant's failure to perform under the contract terms, specifying which provisions were violated.
4. Resulting damages from the breach, showing both the fact of damage and a reasonable basis for calculating the amount.

California courts require specificity in pleading these elements, and failure to adequately prove any single element will defeat the claim entirely. The burden of proof remains with the plaintiff throughout the litigation.

California law recognizes both written and oral contracts as enforceable, but significant legal differences exist between them. Written contracts provide clear documentary evidence of the parties' agreement and are governed by a four-year statute of limitations under California Code of Civil Procedure Section 337. Oral contracts, while legally valid, face a shorter two-year statute of limitations under CCP Section 339 and present substantial evidentiary challenges in proving the exact terms.

California's Statute of Frauds, codified in Civil Code Sections 1624 and 1091, requires certain contracts to be in writing, including:

• Agreements for the sale of real property
• Contracts that cannot be performed within one year
• Promises to pay another's debt
• Contracts for goods over $500 under the Commercial Code

Written contracts also benefit from the parol evidence rule, which generally excludes prior oral statements that contradict written terms. Courts strongly prefer written documentation for complex commercial arrangements.

Yes, you can sue for breach of an oral contract in California, provided the agreement does not fall within the Statute of Frauds requirements. California Civil Code Section 1622 explicitly states that contracts may be oral unless specifically required by law to be in writing. To succeed in an oral contract lawsuit, you must prove all standard breach elements plus the specific terms of the verbal agreement through credible evidence.

This evidence may include:

• Witness testimony from those present during the agreement
• Partial performance documentation
• Subsequent written communications referencing the agreement
• Course of dealing between parties
• Any recordings or contemporaneous notes

California courts apply the same damage principles to oral contracts as written ones, though proving damages often requires more extensive evidence. The two-year statute of limitations under CCP Section 339 applies, making prompt action essential. Courts may also consider industry customs and prior dealings between parties to interpret ambiguous oral terms.

California Civil Code Sections 1549 through 1580 comprehensively define the requirements for a valid contract. Under Section 1550, a contract requires:

• Parties capable of contracting - Under Section 1556, parties must be of legal age (18 in California), of sound mind, and not deprived of civil rights.
• Mutual consent - Governed by Sections 1565-1566, this requires a genuine meeting of the minds on all material terms, free from fraud, duress, menace, or undue influence.
• Lawful object - Under Sections 1596-1598, the contract's object must be lawful, possible, and ascertainable; contracts for illegal purposes are void and unenforceable.
• Sufficient consideration - Addressed in Sections 1605-1615, this requires each party to exchange something of value, whether money, services, or forbearance from a legal right.

California courts will not inquire into the adequacy of consideration unless fraud or unconscionability is alleged. All these elements must coexist at the time of contract formation for validity.

When only part of a contract is breached in California, the legal consequences depend on whether the breach is deemed material or minor. A partial breach that is minor allows the non-breaching party to recover damages for the incomplete performance while still being obligated to fulfill their remaining contractual duties.

California courts use a multi-factor test to evaluate partial breaches, examining:

• The extent of the nonperformance
• The likelihood of cure
• The adequacy of compensation through damages
• The degree of hardship to either party

Under California Civil Code Section 3300, the injured party may recover the difference between what was promised and what was actually delivered. If the partial breach substantially impairs the contract's value, it may be classified as material, permitting the non-breaching party to suspend their own performance and potentially terminate the agreement. The doctrine of substantial performance, recognized in California, allows a party who has substantially completed their obligations to recover the contract price minus damages for the deficiencies.

Anticipatory breach, also called anticipatory repudiation, occurs under California law when one party unequivocally indicates, before performance is due, that they will not fulfill their contractual obligations. California Civil Code Section 1440 provides that performance is excused when the promisor prevents or makes performance impossible. For anticipatory breach to be actionable, the repudiation must be clear, absolute, and unequivocal—mere expressions of doubt or difficulty are insufficient.

The innocent party facing anticipatory breach has several options:

• Treat the repudiation as an immediate breach and sue for damages without waiting for the performance date
• Wait until the performance date to see if the breaching party changes position
• Urge retraction and proceed with their own performance

California courts have held that if the innocent party elects to treat the anticipatory breach as immediate, they must mitigate their damages by seeking alternative performance elsewhere. The measure of damages is generally the difference between the contract price and the market price at the time performance was due, plus any consequential damages.

California courts follow established rules of contract interpretation codified in Civil Code Sections 1635-1663 when analyzing breach of contract claims. The primary goal is to ascertain and effectuate the mutual intention of the parties at the time of contracting, as stated in Section 1636. Courts first examine the contract's plain language, giving words their ordinary and popular meaning unless technical terms are used.

Key interpretation principles include:

• Under Section 1641, the whole contract must be read together so that each clause helps interpret the others
• When contract language is ambiguous, courts may consider extrinsic evidence including circumstances under which the contract was made
• The parol evidence rule (CCP Section 1856) generally prevents introduction of prior oral agreements to contradict a fully integrated written contract
• California applies the doctrine of contra proferentem, interpreting ambiguous terms against the party who drafted them

Courts prefer interpretations that give effect to all contract provisions rather than rendering any term meaningless or surplusage.

The distinction between material and minor breach is crucial in California contract law because it determines the available remedies for the non-breaching party. A material breach is a failure to perform a substantial part of the contract that defeats its essential purpose, allowing the injured party to treat the contract as terminated, cease their own performance, and sue for total breach damages.

California courts evaluate materiality by considering factors including:

• The extent of non-performance
• Whether the injured party received the substantial benefit they bargained for
• The likelihood the breaching party will cure the defect
• The breaching party's good or bad faith
• The hardship to either party

A minor breach, conversely, is a failure that does not go to the essence of the agreement and can typically be compensated with money damages while the contract remains in force. With a minor breach, the non-breaching party cannot terminate but must continue performance while seeking damages for the deficiency. The practical consequence is that incorrectly treating a minor breach as material may itself constitute a breach by the innocent party.