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Evaluating Potential Breach Of Contract Cases In Tennessee (Part One)

While the types of contracts and businesses involved in breach of contract cases vary widely, as a general rule, the basic principles of contract law that Tennessee courts apply in breach of contract cases are pretty much the same in most cases. One exception to that general rule is breach of contract cases governed by the Uniform Commercial Code, as adopted in Tennessee, which, generally speaking, applies only in cases involving the sale of goods.

There are innumerable factors that need to be considered in evaluating breach of contract cases, and this blog is not nearly comprehensive enough to be taken as a complete and definitive checklist for evaluating potential breach of contract cases.

In evaluating a breach of contract case, it may be productive to break the potential case down into two broad areas for evaluation: (1) Liability; and (2) Damages. (Part Two of this blog addresses damages).

Here are some factors/principles to consider when evaluating the potential liability of a defendant in a breach of contract case in Tennessee:

• STATUTE OF FRAUD DEFENSES: In Tennessee, some contracts must be in writing, and must be signed by the defendant. The most frequent types of cases in Tennessee to which the statute of frauds might apply are: Real estate sales cases, lease cases, and other breach of contract cases involving the transfer of an interest in real property; breach of contract cases involving contracts that cannot possibly be performed within one year; breach of contract cases involving contracts guaranteeing the payment of someone else’s debt; and cases involving the sale of goods worth over $500.00. Bear in mind that there are many ways around the statute of frauds when it applies, so don’t “throw in the towel” before you get the opinion of a skilled, experienced breach of contract lawyer or law firm.

• DEFINITENESS: More frequently than one might expect, parties enter into what they believe is a valid contract though a court, ultimately, will never enforce it because one, or more, of the terms of the contract is too indefinite.

• PAROL EVIDENCE RULE: In many breach of contract cases, the parol evidence rule prohibits the introduction into evidence of discussions and agreements that occurred prior to the execution of the written contract. This rule, in some cases, can completely cut the legs out from under one of the parties to the case.

• STATUTES OF LIMITATION: An otherwise good breach of contract claim may be barred by a statute of limitation. In Tennessee, most breach of contract cases, other than UCC breach of contract cases (4 year statute of limitation) or cases involving demand notes (10 year statute of limitation) must be filed within 6 years of the accrual of the cause of action. Beware of statutes of limitation that have been agreed to by the parties. For example, many disability insurance policies, and other insurance policies, contain statutes of limitation that require any breach of contract claim to be filed years before Tennessee law would require.

• AMBIGUOUS CONTRACTUAL PROVISIONS: Frequently, breach of contract cases arise because one or more terms of the contract are susceptible to two, or more, different meanings. If a contract is truly ambiguous, the very first thing that you should consider is which of the parties drafted the ambiguous provision. Why? Because, under Tennessee law, an ambiguous provision which is capable of two different interpretations will be interpreted in favor of the party who did not draft the provision. This rule of interpretation has been a “game changer” in many breach of contract cases in Tennessee.

• LOOKING AT THE “FOUR CORNERS” OF THE CONTRACT: A bedrock principle of Tennessee contract law is that a court must construe a contract so as to carry out the intent of the contracting parties. In determining the intent of the parties under Tennessee law, a court is required to look first at the intention of the parties as expressed in their written agreement. If the intent of the parties can be determined by reference to the words within the “four corners” of the contract, the court cannot consider any other evidence of the parties’ intentions, such as the testimony of a party as to what he or she understood the contract to mean.