An extract from The Complex Commercial Litigation Law Review, 2nd Edition

Breach of contract claims

To establish a breach of contract claim, a plaintiff must show (1) a valid contract, (2) a contractual duty, (3) a breach of that duty, and (4) damages. The third element – breach – is satisfied if 'a party fails to perform when performance is due'. When a contract fails to specify a time for performance, DC law implies that performance must be made within a 'reasonable time'. Additionally, DC and Virginia recognise the doctrine of anticipatory repudiation, under which '[a]n aggrieved party . . . may be entitled to sue prior to breach if the other party has . . . communicated, by word or conduct, unequivocally and positively its intention not to perform'.

Defences to enforcement

i Indefinite material terms

A contract 'must be sufficiently definite as to its material terms (which include, e.g., subject matter, . . . payment terms, quantity, and duration) that the promises and performance to be rendered by each party are reasonably certain'. But courts are wary not to push this requirement to 'extreme limits'. They recognise that '[a]ll agreements have some degree of indefiniteness and some degree of uncertainty'. Thus, the material terms need not be 'fixed with complete and perfect certainty.' Rather, an enforceable contract need only have '[r]easonable definiteness in [its] essential terms' – essential terms must be sufficiently concrete for a 'court to determine whether a breach has occurred and to identify an appropriate remedy'.

ii Statute of limitations

The statute of limitations is frequently raised as a defense in contract litigation. Subject to exceptions, the limitations period begins to run when the breach of contract occurs. In DC, an aggrieved party generally has three years from that time to file a lawsuit. Virginia applies a three-year limit to unwritten contracts, and a five-year limit to written contracts 'signed by the party to be charged'.

iii Duress

Proving duress is challenging. The party seeking the benefit of a duress theory must show '(1) an improper threat and (2) the lack of a reasonable alternative.' Both jurisdictions will limit the range of conduct that constitutes an improper threat. Additionally, DC courts will typically hold that litigation is a reasonable alternative. Parties in DC seeking to show that it was not must provide 'facts establishing specific financial harm' that made it an unreasonable alternative.

iv Contracts against public policy

Absent a situation where a contract is in direct violation of the law, DC courts are extremely reluctant to void contracts on public policy grounds. Indeed, two main instances in which DC courts have been willing to void contracts on the basis of public policy could be characterised as violation-of-the-law cases.

In Virginia, '[t]he meaning of the phrase public policy is vague and variable; courts have not exactly defined it'. Virginia courts have in the past defined it as 'the principle which declares that no one can lawfully do that which has a tendency to be injurious to the public welfare' – an approach that is significantly broader than DC's. However, this broad approach is not without limits, and modern Virginia courts caution that they are not likely to void an agreement unless the 'illegality' of it 'is clear and certain'. For example, although Virginia courts have held that 'pre-injury release provisions relating to personal injury' are void, they have not been willing to void provisions that indemnify a party from personal injury liability.

v Impossibility

Impossibility is rarely applied in either jurisdiction. Generally though, it provides that if 'a promisor's contractual performance is made impossible by a change in character of something to which the contract related, or which by the terms of the contract was made a necessary means of performance, the promisor will be excused, unless he . . . expressly agreed in the contract to assume the risk of performance.' The defense will be successful only in limited circumstances: a 'mere inconvenience or unexpected difficulty' is not enough to excuse contractual obligations under this defense.

vi Accord and satisfaction

The last defense we highlight is accord and satisfaction. Accord and satisfaction occurs after formation. When parties to a contract have a dispute but agree to resolve their differences through payment of an amount other than what was originally agreed upon, the 'new' payment 'satisfies' the debtor's original obligation under the contract. A common example of this doctrine is cashing a check that says 'payment in full'. In that situation, the creditor's decision to cash the check may operate as acceptance of the alternative payment. Importantly though, a genuine dispute is a prerequisite. An accord and satisfaction defense will not be successful if a creditor cashes a check that says payment in full, but the parties have not legitimately disputed the amount due before the creditor cashes the check. When an accord and satisfaction claim fails, courts will likely deduct the amount paid from the plaintiff's damages.