It’s Business And It’s Personal

Due to precautions related to COVID-19, remote consultations via teleconferencing, Facetime or Skype are available. Please contact our office to discuss if this option is appropriate for your situation. Let’s all stay healthy and safe.

Breach of contract litigation often involves a complex analysis

| Feb 21, 2016 | Business Contracts & Disputes |

Breach of contract actions in North Carolina and in other states are sometimes complex matters that involve an in-depth evaluation of the facts and wording of the agreement to determine if there is, in fact, a breach and what damages should be awarded. The contract, if it is in writing, is the first place to start. A simple breach of contract situation recently reported in another state may help to show some of the issues that arise.

In what appears to have been a non-jury trial, a federal district court judge ruled recently that a non-profit center for the arts and sciences must pay $365,906 in breach of contract damages to a movie projection equipment company. The center had a long-term lease to rent the equipment until 2019, but in 2014, it removed the company’s equipment and started using a new system. In the breach of contract action that followed, the center claimed that the projection system could not show Hollywood movies.

The officials of the Whitaker Center for Science and the Arts claimed that IMAX, the projection equipment company, had misled the center regarding the capability of the equipment. Material misrepresentations, made knowingly, can result in rescission of the contract. However, the federal judge who heard the testimony did not believe the misrepresentation defense, and she ruled instead that there was, in fact, a breach of contract by Whitaker.

The inability of the equipment to serve a certain purpose is not normally a valid reason to rescind a contract. The court apparently computed the gross rental for the remaining years and deducted the plaintiff’s expenses and normal business costs incurred to get a net loss amount. The general rule of breach of contract damages in North Carolina and all other jurisdictions is that the plaintiff should be placed in the same position it would have been had the other party not breached the contract. The plaintiff must also mitigate damages, however, meaning that it must try to rent the equipment to another customer, and the reasonable rental amount is then deducted from the plaintiff’s net loss.  

Source: pennlive.com, “Whitaker Center ordered to pay IMAX $366K in breach of contract dispute“, Matt Miller, Feb. 10, 2016

Archives

FindLaw Network