Breach of Agreement Example

The purchase and sale agreement signed on August 1st 2014, between Insurance Depot Limited (Depot) and Mr. Sanford (Sanford), is a lawfully binding contract. Because of this, Depot can effectively enforce its deal with Sanford by taking legal action. Depot's deal with Sanford satisfies the necessary elements of factor, consensus, goal, legality, and capacity:

  • Consensus
  • There was a written arrangement that was authorized by both get-togethers. This is proof an offer and agreed upon acceptance.
  • Consideration
  • Sanford sold his business for $1. 4 million to Depot - this can be an exchange.
  • Intent
  • Intention is presumed in commercial deals such as the sale or purchase of a business.
  • Capacity and legality
  • There is not a evidence to suggest that either party lacked capacity, and both were displayed by lawyer. There have been no signs or symptoms of illegality in the agreement.

Because the agreement satisfies all major elements discussed above, it is enforceable under the rules of contract laws.

What will be the likely result if they go to trial?

If each goes to trial, Depot must successfully illustrate that Sanford breached at least one of the procedures of the contract. The contract describes one major restrictive covenant: a non-competition clause. In this case, Depot can sue Sanford for breaching the non-competition provision of the purchase and deal agreement.

The non-competition clause is legitimately enforceable as it is affordable, and it does not contradict public coverage. The clause is also clear and unambiguous. It really is specific as it denotes the time shape of five years and geographical range of a hundred kilometres that prohibit Sanford from participating in the business of insurance brokerage. For the clause to be enforceable, these constraints have to be considered realistic. The geographic and time-based restrictions are assumed to be realistic in cases like this.

Sanford violated the non-competition clause by starting his new insurance brokerage only two blocks away from Depot. Sanford's breach of the non-competition clause effectively gives Depot the to claim damages. In order to be entitled to a fix, Depot must confirm in a judge of legislations that Sanford's breach of agreement adversely afflicted Depot's business earnings. Depot could then be awarded financial compensation (pecuniary damage) for the lost potential business. In addition, Depot may also be eligible for the equitable cure of an injunction on Sanford's new business. This would indicate Sanford could have stop business functions until the five-year span of time has elapsed, allowing Depot to determine itself as a significant industry player in the region.

In terms of solicitation, Sanford did not actively solicit customers - these customers thought we would switch to Sanford's new organization at their own will. In case the contract did add a non-solicitation clause, Depot may likely be unsuccessful in taking legal action with regards to it. Depot should target its legal attempts entirely on the breach of the non-competition clause.

Should Depot sue with regards to the overstatement of accounts receivable?

Although there is an overstatement of the accounts receivable on Sanford's financial assertions, Depot shouldn't sue because of this misrepresentation. It is because Sanford innocently miscalculated the accounts receivable statistics; it was not done in a fraudulent or negligent manner. As the affirmation was a misrepresentation given the actual fact that it was false, unambiguous, worried about an undeniable fact, and material, it generally does not fully satisfy all of elements of actionable misrepresentation. Because of this, Depot shouldn't sue.

In the situation of innocent misrepresentation, the result is the solution of rescission. This means that the deal would be cancelled, and both functions would go back to their pre-contractual possession positions. That is likely not in Depot's best interest, as they have already owned the business enterprise for two years, and have thus invested a substantial timeframe and money in to the business's development. Moreover, Depot has known concerning this error since approximately January 2015, and didn't act upon it immediately. This reduces the probability of the treatment of rescission. Because of the innocent characteristics of the misrepresentation, and the actual fact that the only real results is rescission, Depot shouldn't go after any legal solution based on the misstated accounts receivable.

What should Depot do?

For the reason why layed out above, Depot should sue Sanford for breaching their deal, specifically the non-competition clause than it. The business is very likely to earn a legal dispute against Sanford, and operates the risk of losing even more business to Sanford if they choose to remain passive.

Going ahead, Depot should retain a legal professional to signify them, and examine precedent cases in order to gauge the most likely course of legal action. Depot also needs to consider set up financial compensation that may be awarded in a lawsuit will outweigh the immediate and indirect costs involved in a lawsuit. Legal action is most likely worth Depot's money and time in cases like this, as an injunction on Sanford allows them to establish themselves in the insurance industry and create customer interactions without Sanford's competition for the rest of the time frame of the covenant. To avoid losing more customers to Sanford, who may have many connections and more experience in the local competitive surroundings, Depot should pursue legal action immediately.

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