In this article, we will provide an overview of Breach of Contract law in Illinois with a look to the future. Contract litigation is a complex area of law with a lot of moving pieces, it is important to work with a competent business litigation lawyer when a relationship breaks down into a contract dispute. Understanding what breach of contract is and how courts consider this issue is a good place to start. We will discuss:
- What is breach of contract in Illinois?
- What do courts consider in a breach of contract case?
- What are the likely changes breach of contract law could undergo in Illinois during 2021 and beyond?
What is breach of contract in Illinois?
Breach of contract in Illinois can be understood as a failure to perform in the agreed upon manner specified in a contract. This can look like a number of different scenarios. Breach of contract occurs when a party only partially performs on their responsibility, when a party fails to deliver in an agreed upon time frame, or when a party does not deliver at all or in the agreed upon manner. However, this alone does not establish a breach of contract claim.
There are four elements that must be present for a breach of contract claim to be brought in Illinois courts. First, a valid contract will need to exist. A contract is valid when there is a firm offer by one of the parties, an acceptance by the other, consideration in terms of an exchange of value, an intention by the parties to be legally bound by their agreement, and the legal capacity on the part of the parties to enter in a contract. Note that this means verbal contracts can be perfectly valid.
Second, we need a breach of the contract by the would-be defendant. As explained above this can be a number of different scenarios that involve the party failing to perform on their side of the deal. Third, we need the injured party to have performed their part in the contract. Note that if the breaching party has committed what is termed a “material breach,” meaning a breach so severe that it undermines the benefit the other party was intended to receive from the contract, then the non-breaching party is excused from performance. And lastly, we need the injured party have suffered some economic damage as a result of the other party’s failure to perform. If all these elements can be established, a claim for breach of contract can be brought in Illinois courts. To explore this topic in more depth, please check our article What is a Breach of Contract?
What do courts consider in a breach of contract case?
Illinois courts consider a number of issues when hearing a breach of contract case. Courts will examine the type of breach, along with its severity. They will also consider to what extent the performing party has been denied their intended benefit under the contract, and the non-performing party’s capacity to compensate them.
Note that even if a breach has been established, the court will also need to consider whether there was a legal reason excusing performance. There are a number of scenarios in which a failure to perform is legally acceptable. As stated above, if the opposite party has already materially breached this would excuse performance. If a party represents or otherwise indicates through its actions that they no longer intend to perform under the contract, this will constitute anticipatory repudiation and would also excuse performance.
Duress, in the sense a party was forced into entering a contract through either physical or economic intimidation, or unconscionability in that one party has been exploited into completely unreasonable terms, would excuse performance. Similarly, undue influence where one party has a high level of control over the actions of the other, or fraud in that a material misrepresentation has been made would negate the need for performance.
Courts will also excuse performance in the event a mutual mistake. The important thing to keep in mind with this defense is that the mistake must be mutual and material. This means both parties were incorrectly operating under false information, and that information was critical in the formation of the contract. If one party had an accurate understanding of the situation than this defense is not available. Impracticability, meaning the total frustration of the contracts purpose beyond the control of the parties, is an additional defense we will explore in deeper detail below.
What are the likely changes breach of contract law could undergo in Illinois for 2021 and beyond?
The state of breach of contract law in Illinois could be facing a big shake up with the coronavirus and the subsequent shut down orders the state has undergone. A previously unimportant common clause featured in many contracts is already having a big impact at the federal level in Illinois, with the potential for serious implications for state courts. “Force Majeure” clauses, French for “greater force,” are contract provisions where both parties agree that in the event that unforeseen circumstances beyond the control of the parties, make performance of the contract effectively impossible, both parties will then be excused from performance. This clause covers so called, “acts of God,” such as natural disasters, and potentially, Illinois’ Coronavirus shut down orders.
In re Hitz Restaurant Group, the Northern District of Illinois Bankruptcy Court faced this exact question when a restaurant group sought to excuse rent payment under their lease. Their argument was that Governor Pritzker’s shutdown order constituted such a force under the terms of their contract, in particular their legal inability to serve customers with in-person dining. The court agreed, finding that their rent payment should be reduced in correspondence with the loss in revenue that could be accrued to the coronavirus order. There are a few things to note here; the force majeure clause in question directly referenced government action, and the court only reduced rather than outright excused the tenants rent payments. However, it is still a clear example of a court finding that a contract’s force majeure clause was triggered by the Illinois stay at home order. For more information on how force majeure clauses work, and how they might apply to your situation in the era of COVID, please check out the following article Can A Contract Be Nullified Due to Force Majeure Clauses?
If you have a breach of contract question it is critical that you be informed and well advised. Working with a qualified Illinois contract attorney can make the difference. Call our office at (630) 324-6666 or schedule a consultation with one of our experienced breach of contract lawyers today. You can also fill out our confidential contact form and we will get back to you shortly.
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