Actions Speak Louder than Words

June 17, 2013

Contracts are agreements, written or oral, which bind people to complete a set of actions. It is expected that when you enter an agreement, you intend to follow through with it and complete what is asked of you. This, however, is not always the case. Breaches of contract happen, but how you deal with it will impact future decisions.

Take for the example of the California case of Whitney Investment Company v. Westview Development Company. In this case Whitney Investment Company (Whitney) is appealing a lawsuit where it previously sued Westview Development Company (Westview) for breach of contract. Whitney and Westview had an agreement where Westview hired Whitney as its broker to sell a parcel of land.

This was supposed to be an exclusive listing, so that regardless of who sold the property during the life of the agreement, Whitney would still receive a commission off of the sale. In return, Whitney agreed to pay monthly rentals on two existing highway advertising signs then leased by Westview, to operate a tract office located on the premises, to pay one hundred dollars a month rental to Westview for the tract office, to pay one-half the cost of bringing electricity to the tract office, to maintain an adequate sales force, and upon Westview's request to expend at least $2,000 for advertising.

Whitney is accusing Westview of breaching the agreement because during the life of the contract, Westview sold part of the land through a different broker and refused to pay Whitney a commission. Whitney,however, partially breached the agreement at the very beginning by failing to occupy the tract office and spend $2000 for advertising at Westview's request. Westview claims that due to Whitney's breach, there was no valid contract at the time it sold the property.

In the first case, the court agreed with Westview and found that because Whitney breached the contract first. Because of the breach and a number of other issues, the court found that Whitney was not entitled to the commission. The appeals court, however, disagreed. A breach does not terminate a contract as a matter of course but is a ground for termination at the option of the injured party. Therefore, a finding of termination cannot be implied from a finding of a breach, it must be stated clearly. In this case, despite the fact that Whitney did not complete its side of the agreement, Westview did not officially terminate its agreement with it until six months later, which was a date provided within the contract. Also, throughout that six month period, Westview worked with Whitney and met with potential buyers it found for the property. The appeals court found that although the evidence disclosed a partial breach by Whitney, there was also evidence from which the court could have found that Westview waived the breach. The appeals court decided it was unclear whether Westview waived Whitney's breach and that the issue was material to the case, and therefore reversed the previous court's findings.

Contract cases can be difficult because timing is everything. Enlisting the help of an attorney can enable you to make better decision for you and your business. If you are in the Sacramento area and are in need of legal please contact our office.