The elements of a breach of contract claim are well known to many individuals and business owners. These elements are as follows:
1) existence of a valid contract;
2) breach of that contract; and
3) damages as a result of that breach.
A traditional defense to a breach of contract claim is that the breach was a “minor” breach and not a “material breach”. A “material breach” goes to the heart of a contract, whereas a minor breach is much less severe. Generally, a minor breach is actionable, however, a plaintiff would not receive as much of a damage award. The caliber of breach was never an element of a breach of contract claim until Florida recently altered this through several cases that came before the court.
In 2000, the Florida district court injected the materiality requirement into the rational for its case holding without explanation (Abbott Labs v. GE Capital, 765 So. 2d 737, 740 (Fla. 5th DCA 2000). Many cases followed with references to the Abbot Labs case. Further, in June of 2013, another court announced that the elements of a breach of contract claim were “(1) a valid contract, (2) a material breach, and (3) damages” (Havens v. Coast Florida, P.A., 117 So. 3d 1179 (Fla. 2d DCA 2013)). Materiality requires proof that the breach goes “to the essence of the contract.” No other state requires such materiality for a party to recover from a breach of contract claim.
Such Florida case law created a fundamental problem in pursuing breach of contract claims, however, the requirement was not coded by statute. Therefore, each court must still determine the materiality requirement on its own based on the facts and circumstances of each particular case.
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Protecting a great idea almost often includes incorporating your business idea with the state. Before you incorporate a business, you will need to know which business entity to choose. The general options include: the limited liability company, the partnership, the limited partnership, the C-corporation or the S-corporation. Also, remember that the limited liability company can be taxed as an S-corporation while affording the legal protections that other limited liability companies have. Choosing the right business entity is a tough decision, but knowing the advantages and disadvantages of each entity type can make the choice easier.
First, traditional partnerships generally are disfavored because each partner has unlimited liability with respect to all of the other partner’s actions. Limited partnerships are a better option, but should be used with caution, as there still needs to be a general partner who bears all of the responsibility of the partnership on their shoulders. Limited partners enjoy limited liability, but they do not enjoy any ability to contract partnership actions. If a limited partner tries to manage a limited partnership, then they may be converted into a general partner and therefore lose their “limited liability” protection. These entities are often used in cases where a person is seeking investors for their business and/or where there is some sort of asset protection plan (“family limited partnerships”).
Limited liability companies (“LLC”) and corporations are used more frequently for new entities than partnerships. Deciding between whether to use a limited liability company over a corporation depends on a number of factors. One factor is whether your company will go public (does the business plan include selling shares on the public stock market). If so, then you must use a C-corporation since that is the only entity that allows this action. If you have a small family business, an LLC may be more favorable over the corporation as there are fewer formalities that will have to be followed overall. Choosing a business entity is an important task and depends on the purpose of the business as well as other factors on a case-by-case basis.
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