General Information: Recent data analysis of business history suggests that somewhere around 50-90% of Michigan businesses will be engaged in a legal dispute over the next 10 years. And a large number of those disputes will involve contract litigation. Fortunately, if trends are cause for prediction, approximately 70% of filed business lawsuits are resolved out of court. Michigan allows 6 years to bring a general breach of contract claim (MCL 600.5807(8)), and 4 years to bring a ‘sale of goods’ breach of contract claim (MCL 440.2725(1)).
Better Estimate: It is safe to assume that there is an actual or probable breach of contract in 99% of all contracts formed. And 99% of those are likely (1) unnoticed, (2) minor, (3) not worth the money to litigate, or (4) not worth damaging the business relationship.
For example: Commercial Real Estate transactions are notorious places for all 4 types breach of contract events from the letter of intent (binding provisions) to purchase agreement to closing and beyond. (1) Typical areas of unnoticed breaches are notice provisions. Often times purchase agreements will call for a particular form of notice to be delivered to tenants or the manager of a property before performing inspections; for obvious logistic reasons these are overlooked. (2), (3), and (4) Noticed minor breaches, not worth the money, and not worth damaging relationships: take place most often during the due diligence period and timing provisions when one party fails to deliver a specific requested item of due diligence or fails to deliver it within a particular time period. The minor breaches take place when the party provides most of what is requested, and a lot of what isn’t requested, but the seller fails to deliver a document that the buyer would like to see, but won’t make or break the transaction.
Finally the breach may not be worth the money to enforce or not worth harming the business relationship; buyers often must weigh the benefits and costs of instituting such actions, such as:
a. whether or not the potential defendant is needed in the future for supplying or other business plans such as acquisition;
b. whether clients and customers will view the action as negative (such as subpoenaing a client, or bad publicity of appear litigious);
c. the loss of business hours spent on investigation;
d. the loss of business secrecy and value if it is in the public domain in unsealed court documents;
e. the actual ‘hard’ dollars spent on filing fees and lawyers.
It is not unheard of for the potential aggrieved plaintiff to direct its attorney to contact the potential defendant’s attorney to discuss a potential resolution outside of litigation and even settlement. Concessions and temporary price reductions made by the potential defendant allow business relationships survive and thrive.
Damages: Typically, specific performance, general, and special damages are the most common remedies for breach of contract in business disputes resolved in court.
