Once you’ve weighed your options [LINK to considerations before you sue] and decided to sue [LINK to anatomy of a lawsuit/wrestling bear] for breach of contract, what do you do first? Often, a notice of breach, sometimes called a demand letter, is a necessary first step. Moreover, the notice of breach can be helpful both as a step to resolving contractual issues, as well as to establish your performance or excuse for nonperformance and the other party’s breach.
Some contracts require a notice of breach of contract to be sent to the breaching party before a lawsuit can be filed. As a refresher on breaches, in order to succeed on a claim for breach of contract, a plaintiff “must prove (1) the contract, (2) the plaintiff’s performance of the contract or excuse for nonperformance, (3) the defendant’s breach, and (4) the resulting damage to the plaintiff.” Richman v. Hartley, 224 Cal.App.4th, 1182, 1186 (2014).
What exactly is a notice of breach? A notice of breach is usually a letter (notice) that lets the other party know that they are in noncompliance (in breach) with the contract. It is usually written by a lawyer, especially if a lawsuit is likely. A typical notice of breach cites the clause or clauses of the contract the party is breaking, as well as a basic outline of the facts surrounding the breach.
Contracts often vary as to what kind of breaches require a notice of breach, when they are to be be sent, and what specifically needs to be in the notice. The notice clause in your contract is your guide. For example, while you may provide notice in case of any type of breach, but most contracts provide for notice of breach in the case of a “material breach.” A total or complete breach of the contract is of course material, but whether a partial breach is material depends on the importance or seriousness thereof and the probability of the injured party getting substantial performance. See 21 U.C. Davis L. Rev. 1073; Superior Motels v. Rinn Motor Hotels, 195 C.A.3d 1032, 1052 (1987). As such, it is important to ask whether the other party’s conduct or failure to act has resulted in a breach that goes to the root of the contract’s purpose. See, e.g., Karz v. Department of Professional Vocational Standards, 11 Cal.App.2d 554, 557 (1936).
Even if your contract doesn’t require a notice of breach, it is still best practice to send notice anyway. As we’ve discussed in previous posts [LINK TO CONSIDERATIONS], it behooves you to try and resolve breaches and other contractual issues outside of court and sending notice of breach is a good first step to put the other party on notice of the issue. By sending notice, you give the other party the chance to become aware of their breach and subsequently, hopefully, fix it before a lawsuit becomes necessary. Additionally, should the breach not get resolved out of court, the notice of breach and any responses can be used as evidence in court to show that the party knew or should have known of the breach.
What must be included in a notice of breach? This may be spelled out specifically in your notice clause, so start by reading your contract closely. However, if your contract’s notice clause does not mention the contents of the notice or if you do not have a notice clause altogether, you should be sure to include a few specific things in your demand letter to ensure that you properly put the other party on notice:
The first thing that should be included, as obvious as it may seem, is the date of the notice. This creates a record of the date the breaching party was notified, which may be helpful evidence in court should the breach result in a lawsuit. You should also include the date of the alleged breach both to make the other party aware and to preserve it for the evidentiary record in court.
Next, include a description of the breach; this should be very specific. You should identify the clauses of the contract which you feel the other party is not complying with and include the specific language of each breached clause in your letter. Also include the relevant facts surrounding the other party’s breach so they are made aware of their specific conduct or failure to act which caused the breach or breaches.
A notice of breach should also outline a timeframe for the breaching party to respond or to cure the breach; again, a specific cure period may be outlined in your contract. “Curing” the breach gives the other party a second chance to “substantially perform” under the contract. Corbin on Contracts, § 36.7 at 349 (1999). In order to properly give the other party a chance to cure, the party must be given time and a real opportunity to cure prior to terminating the contract. Restatement Second, Contracts § 241. Where the opportunity to cure is required under the contract, if the injured party does not afford the breaching party the opportunity to cure, the injured party may not file an action for breach of contract for its own failure to allow the other party to perform. See Mad River Lumber Sales v. Willburn, 205 Cal.App.2d 321 (1962).
Sometimes, though, it is too late to cure the breach. For example, if an artist had a contract to perform at a venue on a specific date and the artist didn’t show up for the concert on that day, the breach cannot be cured even with notice of the breach. In cases like this, the notice serves to terminate the agreement and puts the other party on notice that the injured party will seek damages.
How should you send the demand letter? Again, it depends; your notice clause may set out a specific method of delivery to use. However, if not, as a practical matter, you should send the notice of breach by FedEx to ensure its delivery. Practically speaking, no one refuses a FedEx envelope. You should not use certified mail, for example, because the other party can easily refuse its delivery. Thus, using FedEx is a safer bet to ensure that the other party gets your letter and cannot later claim that they did not have notice.
Finally, let’s talk about what you should do if you receive a notice of breach. First, don’t panic! As mentioned above, unless it is too late to cure the breach, this notice gives you an opportunity to make things right without going to court. You should respond to the notice; you (or more likely, your lawyer) can respond a couple different ways.
The first way you can respond is, if you do not feel that you have breached the contract, to explain that you are not in breach of the cited clauses and give a factual explanation as to why you are still in compliance with the contract.
The second way you can respond is to indicate your willingness to cure your breach. If it is not too late to cure your breach and you recognize that you are, in fact, in breach, you should work with the other party to cure the breach in a way that keeps the contract intact and renders a breach of contract lawsuit unnecessary.
Originally posted: June 29, 2020
Last updated: August 23, 2021
Pfeiffer Law Corp is a Santa Monica, California firm that represents entertainment clients.
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