Have you ever been in a situation where you think someone has breached a contract, but you’re not sure how to prove it legally? You may have asked “Did I get what I bargained for?” Or maybe the question was whether the buyer is correctly interpreting how the monthly payment is calculated. But you then ask what evidence is needed to unequivocally prove it? This post provides a brief overview of the legal rule on breach of contract and discusses a case from Arizona that provides a good example of how the rule is applied.
What Is the Legal Rule on Breach of Contract Under Arizona Law?
The legal rule on breach of contract is straightforward: To prove a breach of contract claim, a plaintiff must show:
- The existence of a contract;
- A breach of an essential contract obligation; and
- A loss caused by the breach (usually an economic loss).
Graham v. Asbury, 112 Ariz. 184, 185, 540 P.2d 656, 657 (1975) citing Clark v. Compania Ganadera de Cananea, S.A., 95 Ariz. 90, 387 P.2d 235 (1963). This rule seems simple enough but, in real-world situations, the analysis can be complex and other legal principles can be asserted as defenses.
Applying the Legal Rule on Breach of Contract: An Example from Arizona Case Law
In Graham v. Asbury, the defendant (Asbury) worked for the Arizona Department of Public Welfare (ADPW), the predecessor to the Arizona Department of Economic Security. Under an agreement with ADPW, Asbury was allowed to take educational leave to complete a graduate degree in return for her agreement to work for ADPW for at least 24 months after completion of the degree. During the leave, she was paid a little over $4,800.00. The agreement included a formula for calculating the amount to be repaid to ADPW if Asbury left before the 24-month period ended. The formula basically called for a prorated repayment of the $4,800.00 based on the number of months remaining in the 24-month period after resignation.
After completing the degree, Asbury returned to work at ADPW but resigned from her job six months later. In her letter of resignation, she acknowledged that, by resigning, she was not fulfilling her agreement, and she asked about the amount she owed for breaking the agreement. ADPW did not respond to the request regarding the amount owed, but about a year and four months later, ADPW sent a letter to Asbury demanding repayment of $3,541.84. Asbury did not pay the amount demanded, and ADPW filed suit against her. In responding to the law suit, Asbury’s defense was that ADPW was legally prevented from claiming the amount because it had delayed so long before asserting its claim.
Based on these facts, the Arizona Supreme Court noted that a breach of contract had been established. Neither Asbury nor ADPW questioned whether a contract had been formed—so, the first element was established. The second element was established because Asbury acknowledged she was not fulfilling the agreement in her resignation letter. Finally, the third element was established because the agreement included a formula for calculating damages if Asbury did not complete two years of work, and the formula required a repayment of $3,541.84 to ADPW.
What about Asbury’s defense that ADPW was prevented from asserting its claim because it delayed too long? The Court rejected that defense (called “estoppel”) because it requires reliance on the other party’s delay, and Asbury could not show that she relied on the delay. Instead, Asbury was arguing that she was no longer in a financial position to repay the prorated amount owed to ADPW for the year and a half after she resigned.
Conclusion
The Graham v. Asbury case is a good example of a breach of contract and how the three elements of the rule on breach of contract applied to the facts of the case. But the case also shows that other factors can come into play. The facts of a contract situation and the interpretation of a detailed contract can be complex and subtle, and other legal principles can sometimes be used as defenses or to assert counterclaims against the plaintiff.
If you’d like to discuss a breach of contract issue, please contact our office to set up a consultation. Attorney James D. Griffith at Endurance Business Law, PLLC, is an experienced business and contract law attorney and is available to discuss your contract matter. To set up a consultation, please call our office at (480) 997-2951 or use the Contact form on this website.