Understanding Breach of Contract in the Silicon Valley: Part 2

What Is an Installment Contract Breach?

In our last installment, we discussed breach of contract generally. In this post, we will discuss installment contract breach specifically, in addition to the difference between general and incidental damages.

An installment contract is a contract between a vendor and a distributor or supplier where multiple installments of goods are made throughout the life of a contract. While the contract might state that each separate delivery is a separate contract on its own, in truth it is an installment contract. The buyer can reject an installment if the non-conformity substantially impairs the item’s value. UCC §2-612.

For example, a manufacturer of computer parts has an installment contract with a computer parts distributor. If one delivered installment of goods was entirely damaged and unable to be repaired, this could substantially impair the value of all items. The seller can cure the defect (fix the issue) if this only occurs once or twice. If nonconformity of an installment substantially affects the whole contract, the seller may be in breach of the entire contract. The buyer must notify the seller of the breach to move forward with a claim for damages.

What are General Damages?

General damages are financial damages flowing directly from the alleged breach of contract. Cal. Civ. Code §3333. For example, using the installment contract breach hypothetical, the distributor may have incurred financial damages because he could not sell the defective parts the manufacturer/seller attempted to deliver. He may have also suffered financial damages trying to find a substitute seller to obtain the parts he needed. General damages can be specifically traced to the breach in question.

What are Incidental Damages?

On the other hand, incidental damages may be dependent on each specific form of breach and are usually unique to each contract. A plaintiff can only recover incidental damages if they can prove that the defendant was aware of special circumstances tied to the contract. For example, in a breach for non-performance, if the headliner of a major concert did not show up and perform, this would be a total breach and would warrant incidental damages to the plaintiff because no substitute performance would be adequate, nor could the defect be cured in time.

In another example, if a buyer or distributor had to cancel another contract with a vendor because of undelivered or damaged parts delivered late (or on time) by the seller, they may have incurred additional incidental damages. Other examples include storage fees for storing the defective goods, and expenses incurred from inspection of non-conforming goods.

Contact Silicon Valley Contract Breach Lawyers at SAC Attorneys

In the next installment of our blog, we will discuss liquidated damages, specific performance, and punitive damages. If you are currently engaged in a legal battle with a vendor or distributor or you believe your contract has been breached, you need to take legal action. Contract and business litigation disputes are extremely complicated, and damages you may be entitled to are unique to your specific situation. Our lawyers at SAC Attorneys serve business clients throughout Silicon Valley. We can assist whether you are just forming a business or have a pressing litigation dispute that requires expertise. Call us today to schedule a consultation.