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Category: Business Law
Satisfied Customers: 24869
Experience:  20 years experience in business law - sole proprietor, partnership, and corporations
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Ive had a contract with a development team for just over a

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I've had a contract with a development team for just over a year now. Our website went from 20-40% growth per year over the past 4 years to this last year taking a loss of -45% in revenue. We have literally been cut in half in revenue. These problems began when this team came on board. They have promised our mobile site to us which was due to be complete last December. It is August 2013 and it is still not 'done' it has come online, and then taken down our home page servers, it has caused chaos in our database of several hundred thousand shoppers. Our iphone and android apps were due to be complete by the latest, January 2013. They are still not done. We have hired a new server administrator and the findings he is uncovering have everyone on our small team reeling with disbelief. There are blatant mistakes and problems that have been occurring without the knowledge of the owners of this business, leaving us in a position of now having to spend triple what we have been paying just to rectify their problems. They have left my site in a debilitating state, on the brink of closure. Our sales are quite literally half of what they were a year ago, and in my industry, you'd have to be maliciously attempting to destroy a business to make it 'shrink'. Can I sue them for breach of contract, negligence and/or anything else?

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What does the contract state as to what they will do and by when?


Does the contract provide for remedies if they fail to provide such to you?

Customer: replied 3 years ago.

they were supposed to provide network support, yet now a year later say that we don't pay for network support, even though we have a year worth of emails back and forth where they talk about the network service that they provide. the contract for the iphone apps says that if they aren't done by January 2013, the price gets cut in half. We didn't put any concessions in there for if several months after that it still wasn't complete. in addition, the contracted hours we get from them monthly is 80 hours - they are using those hours to work on our app, and literally for the last 8 months they have used our monthly hours in order to continue working on our app, which leaves us with no further development or growth because they haven't figured out how to finish the apps yet. it is incredibly frustrating to have grown a business organically and to have it all slipping away because the people that we entrust with the most vital part of our business are incompetent.

Who wrote the contract - they or you?
Customer: replied 3 years ago.

they wrote it

OK, then clearly given the written and verbal communications they were suppose to include networking as part of their services.

As a general rule, the objective of contract damages is to insure that the aggrieved or injured party should receive what he or she expected from the bargain. To the extent that an award of money can do so, the aggrieved party should be placed in the same position as though the contract had been fully performed. This is what is known as protecting the expectation interest of the parties. (Rest.2d §344(a))

A party cannot recover for loss which he could have avoided or mitigated through his reasonable efforts. (Rockingham Cty. v. Luten Bridge Co. 35 F.2d 301 (4th Cir. 1929); Rest.2d §350)

Damages are limited to those losses which were foreseeable, i.e., in the contemplation of the parties at the time the contract was entered into. (Hadley v. Baxendale. 9 Exch. 341(1854).) ; Rest.2d 351.) Special damages are recoverable when special circumstances exist which cause some unusual injury to the plaintiff. The plaintiff can only recover special damages if defendant knew or should have known of the special circumstances at the time the defendant entered into the contract.

In order to be recoverable, damages must be established with reasonable certainty. (Rest.2d §352; Cal.Civ.Code §3301.) In other words, damages which are speculative, remote, imaginary, contingent, or merely possible cannot be recovered. (McDonald v. John P. Scripps Newspaper (1989) 210 CA3d 100, 104.)

No damages will be awarded for the mental distress or emotional trauma that may be caused by a breach of contract. (Rest.2d §353.)

Loss of profits, present or future, as an element of special or consequential damages, may be recovered for a breach of contract if; 1) The loss is the direct and natural consequence of the breach, 2) It is reasonably probable that the profits would have been earned except for the breach, and 3) The amount of loss can be shown with reasonable certainty.

One that has a predictable and finite number of customers and that has the capacity either to sell to all new buyers or to make the one additional sale represented by the resale after the breach is known as a "lost volume seller." If the seller would have made the sale represented by the resale whether or not the breach occurred, damages measured by the difference between the contract price and the market price cannot put the lost volume seller in as good a position as it would have been had the buyer performed. In these cases the seller is allowed to recover as damages the profit on the lost volume sale. (Neri v. Retail Marine Corp. 285 N.E.2d 311 (N.Y. 1972).) Restatement 2d § 350, Comment d (1979) notes that if a seller would have entered into both transactions but for the breach, then the seller has lost volume as a result of the breach. Thus, lost profits are awarded to a lost volume seller, notwithstanding that the seller resells the item that a buyer contracted to buy, based on the principle that the seller was deprived of an additional sale and the corresponding profit by the buyer's breach.

The general rule is that punitive damages (as opposed to compensatory damages) are not recoverable for breach of contract, even if the breach is willful. (See, UCC 1-305(1).) However, recent cases have tested the limits of this principle. In a cause involving tortious interference with an exisiting contract, the plaintiff may recover the full pecuniary loss of the benefits it would have been entitled to under the contract. The plaintiff is not limited to damages recoverable in a contract action, but instead is entitled to the damages allowable under the more liberal rules recognized in tort actions. (Rest.2d, Torts, § 774A.) In Texaco, Inc. v. Pennzoil, Co. , 729 S.W.2d 768 (Tex.App.1987) the jury was held to have properly based its damage award on the replacement cost model. The jury was correctly instructed that the measure of damages was the amount necessary to put Pennzoil in as good a position as it would have been in if its agreement with Getty had been performed. The punitive damage award, which amounted to 40% of actual damages, was ruled not excessive.

So, given the facts you stated and the results you have stated and the law on the matter - it's very clear that you can not only recover your costs but lost profits.

I would be gathering all my information together and contacting an attorney immediately to file suit against the company.

My only concern is - that they don't have the money or resources to pay the judgment you get against them. Your option then is to try and go after the owners of the company for fraud and deceipt in the matter beyond just your contractual damages.

You asked:

Can I sue them for breach of contract, negligence and/or anything else?

Answer: Absolutely. Not only breach of contract but your lost profits and potentially the torts of fraud and deception.

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Law Pro, Attorney
Category: Business Law
Satisfied Customers: 24869
Experience: 20 years experience in business law - sole proprietor, partnership, and corporations
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