Elements

“A cause of action for breach of contract requires

1. pleading of a contract,
2. plaintiff’s performance or excuse for failure to perform,
3. defendant's breach, and
4. damage to plaintiff resulting therefrom.”

(Munoz v. MacMillan (2011) 195 Cal.App.4th 648, 655.)

The first element is also stated as “contract” or “existence of a contract,” and the second is also stated as “plantiff’s performance or excuse for nonperformance.” Reichert v. General Ins. Co. (1968) 68 Cal.2d 822, 830; Hamilton v. Greenwich Investors XXVI, LLC (2011) 195 Cal.App.4th 1602, 1614. The third element may also include “anticipatory breach.” Reichert, supra, 68 Cal.2d at p. 830;

Oral and Written Contracts

“The elements of a breach of oral contract claim are the same as those for a breach of written contract: a contract; its performance or excuse for nonperformance; breach; and damages.” (Stockton Mortgage, Inc. v. Tope (2014) 233 Cal.App.4th 437, 453).

Statute of limitations

Written Contracts

The statute of limitations is four years in “[a]n action upon any contract . . . founded upon an instrument in writing...” (Code of Civil Procedure § 337(a)). “Ordinarily, a cause of action for breach of contract accrues on the failure of the promisor to do the thing contracted for at the time and in the manner contracted.” (Professional Collection Consultants v. Lauron (2017) 8 Cal. App. 5th 958, 966 (internal citation omitted)). Under Civil Code §1657, “[i]f no time is specified for the performance of an act required to be performed, a reasonable time is allowed. . . .”

Oral Contracts

The statute of limitations on a breach of oral contract claim is two years before the filing of the complaint. (Code of Civil Procedure §§ 312, 339.) A cause of action accrues when, in addition to alleged wrongdoing or breach, plaintiff has suffered actual and appreciable harm. (Davies v. Krasna (1975) 14 Cal.3d 502, 513).

Breach

“An executed contract is one, the object of which is fully performed.” (Civil Code § 1661). “Where a contract is still executory, the promissee is not bound to treat the contract as abandoned on the first breach or any particular breach, and the statute of limitations does not begin to run as long as the promissee elects to rely on the contract.” (Baugh v. Garl (2006) 137 Cal.App.4th 737, 747).

In Romano v. Rockwell, the Supreme Court of California noted that the plaintiff may elect to rely on the contract despite a breach when there are ongoing contractual obligations, and the statute of limitations does not begin to run until the plaintiff has elected to treat the breach as terminating the contract. (Romano v. Rockwell Internat., Inc. (1996) 14 Cal.4th 479, 489). Even with successive breaches, “the injured party could wait until the time arrived for a complete performance by the other party and then bring an action for damages for such breaches.” (Id. at 489-490). The injured party is “not bound to treat the contract as abandoned on the first breach of it, or on any particular breach, but had his election to still rely on it, and the statute of limitations could not begin to run until it had made its election.” (Id.).

Potential Defenses to Failure to Complete Performance

Substantial Performance

The current prevailing doctrine is that substantial performance is sufficient and justifies an action on the contract, although the other party is entitled to a reduction in the amount called for by the contract in order to compensate for the defects. This doctrine applies primarily in building contracts. What constitutes substantial performance is a question of fact. However, it is essential that there be no willful departure from the terms of the contract, and that the defects be such as may be easily remedied or compensated, so that the promisee may get practically what the contract calls for. (1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts, 818, p. 908; Murray's Iron Works, 58 Cal.App.4th 1279, 1291).

Ability to Perform

The want of performance of an obligation, or of an offer of performance, in whole or in part, or any delay therein, is excused by the following causes, to the extent to which they operate:

1. When such performance or offer is prevented or delayed by the act of the creditor, or by the operation of law, even though there may have been a stipulation that this shall not be an excuse; however, the parties may expressly require in a contract that the party relying on the provisions of this paragraph give written notice to the other party or parties, within a reasonable time after the occurrence of the event excusing performance, of an intention to claim an extension of time or of an intention to bring suit or of any other similar or related intent, provided the requirement of such notice is reasonable and just;
2. When it is prevented or delayed by an irresistible, superhuman cause, or by the act of public enemies of this state or of the United States, unless the parties have expressly agreed to the contrary; or,
3. When the debtor is induced not to make it, by any act of the creditor intended or naturally tending to have that effect, done at or before the time at which such performance or offer may be made, and not rescinded before that time.

Civil Code § 1511

If the performance of an obligation be prevented by the creditor, the debtor is entitled to all the benefits which he would have obtained if it had been performed by both parties. Civil Code § 1512.

If performance of an obligation is prevented by any cause excusing performance, other than the act of the creditor, the debtor is entitled to a ratable proportion of the consideration to which he would have been entitled upon full performance, according to the benefit which the creditor receives from the actual performance. Civil Code § 1514.

A refusal by a creditor to accept performance, made before an offer thereof, is equivalent to an offer and refusal, unless, before performance is actually due, he gives notice to the debtor of his willingness to accept it. Civil Code § 1515.

Caselaw

“[E]very contract imposes upon each party a duty of good faith and fair dealing in the performance of the contract such that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract.” (Storek & Storek, Inc. v. Citicorp Real Estate, Inc. (2002) 100 Cal.App.4th 44, 55). “As to acts and conduct authorized by the express provisions of the contract, no covenant of good faith and fair dealing can be implied which forbids such acts and conduct.” (Carma Developers (Cal.), Inc. v. Marathon Development California, Inc. (1992) 2 Cal.4th 342, 374).

“The covenant of good faith and fair dealing, implied by law in every contract, exists merely to prevent one contracting party from unfairly frustrating the other party's right to receive the benefits of the agreement actually made. The covenant thus cannot be endowed with an existence independent of its contractual underpinnings. It cannot impose substantive duties or limits on the contracting parties beyond those incorporated in the specific terms of their agreement.” (Guz v. Bechtel Nat. Inc. (2000) 24 Cal.4th 317, 349–50 (internal citations omitted)).

Damages

Economic Loss Rule

‘‘[W]here a purchaser's expectations in a sale are frustrated because the product he bought is not working properly, his remedy is said to be in contract alone, for he has suffered only ‘economic’ losses... The economic loss rule requires a purchaser to recover in contract for purely economic loss due to disappointed expectations, unless he can demonstrate harm above and beyond a broken contractual promise. Quite simply, the economic loss rule ‘prevent[s] the law of contract and the law of tort from dissolving one into the other.’” (Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 988, internal citations omitted.)

Tort Damages

[C]onduct amounting to a breach of contract becomes tortious when it also violates a duty independent of the contract arising from principles of tort law." (Robinson Helicopter, supra, 34 Cal.4th at p. 998 (internal citations omitted)). "'Tort damages have been permitted in contract cases where a breach of duty directly causes physical injury; for breach of the covenant of good faith and fair dealing in insurance contracts; for wrongful discharge in violation of fundamental public policy; or where the contract was fraudulently induced. '[I]n each of these cases, the duty that gives rise to tort liability is either completely independent of the contract or arises from conduct which is both intentional and intended to harm.” (Robinson Helicopter at pp. 989-990 (internal citations omitted); accord, Benavides v. State Farm General Ins. Co. (2006) 136 Cal.App.4th at pp. 1251-1252.)

Punitive Damages

Although punitive damages may not ordinarily be given for breach of contract, whether the breach be intentional, willful or in bad faith, such damages may be awarded where a defendant fraudulently induces the plaintiff to enter into a contract. The words 'oppression, fraud, or malice' in Civil Code section 3294 being in the disjunctive, fraud alone is an adequate basis for awarding punitive damages.” (Glendale Fed. Sav. & Loan Assn. v. Marina View Heights Dev. Co. (1977) 66 Cal. App. 3d 101, 135 (internal citation omitted)).

Other Forms of Relief

Declaratory Relief

Code of Civil Procedure

Any person interested under a written instrument, excluding a will or a trust, or under a contract, or who desires a declaration of his or her rights or duties with respect to another, or in respect to, in, over or upon property, or with respect to the location of the natural channel of a watercourse, may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an original action or cross-complaint in the superior court for a declaration of his or her rights and duties in the premises, including a determination of any question of construction or validity arising under the instrument or contract. He or she may ask for a declaration of rights or duties, either alone or with other relief; and the court may make a binding declaration of these rights or duties, whether or not further relief is or could be claimed at the time. The declaration may be either affirmative or negative in form and effect, and the declaration shall have the force of a final judgment. The declaration may be had before there has been any breach of the obligation in respect to which said declaration is sought. Code of Civil Procedure § 1060.

Caselaw

“The fundamental basis of declaratory relief is the existence of an actual, present controversy over a proper subject.” (City of Cotati v. Cashman (2002) 29 Cal.4th 69, 79). The complaint will be found sufficient if it sets forth facts showing the existence of an actual controversy relating to the parties’ legal rights and duties, and requests the court to adjudge these rights and duties. (Ludgate Ins. Co. v. Lockheed Martin Corp. (2000) 82 Cal.App.4th 592, 606). Furthermore, “[d]eclaratory procedure operates prospectively, and not merely for the redress of past wrongs.” (Babb v. Superior Court (1971) 3 Cal.3d 841, 848 (internal brackets omitted)).

Specific Performance

To state entitlement to specific performance, Plaintiff must establish:

1. the inadequacy of his legal remedy;
2. an underlying contract that is both reasonable and supported by adequate consideration;
3. the existence of a mutuality of remedies;
4. contractual terms which are sufficiently definite to enable the court to know what it is to enforce; and
5. a substantial similarity of the requested performance to that promised in the contract.

(Tamarind Lithography Workshop, Inc. v. Sanders (1983) 143 Cal. App. 3d 571, 575).

Partial Performance in Relation to Early Termination

In interpreting identical language, the Court of Appeal has held that where a contractor is terminated before finishing a project, it cannot be said to have completed the job under the terms of the products-completed operations hazards. (Clarendon America Ins. Co. v. General Security Indemnity Co. of Arizona (2011) 193 Cal.App.4th 1311, 1318-19).

Partial Performance in Relation to the Statue of Frauds

It is well-established exception to the statute of frauds that where the buyer in a residential property sale takes possession of the property and makes at least partial performance, the agreement is no longer under the statute of frauds. (Winkler v. Jerue (1912) 20 Cal.App. 555, 559; see also Sutton v. Warner (2005) 12 Cal.App.4th 415; Hall v. Hall (1990) 222 Cal.App.3d 578).