Super Lawyers
The top Attorneys in Virginia and
the Washington, D.C. metropolitan
area, only 5% of the attorneys
in the state are named in SuperLawyers
ATA NBTA | The National Board of Trial Advocacy Association of Trial Lawyers of America Virginia Trial Lawyers Association National Asociation of Distinguished Counsel | Nation's Top One Percent | NADC

Beneficial breach may still bring legal action

Virginia business owners may want to pay heed to a recent decision resulting from a lawsuit brought by Fletcher International, Ltd. against Ion Geophysical Corporation. In 2009, Ion entered into an agreement to raise financing that it needed to stay liquid and avoid bankruptcy. Contractually, it was required to obtain approval from Fletcher before entering into one part of the financing arrangement but it failed to do so.

Even though Fletcher benefited from the new funds raised by Ion, it sued for breach of contract. The Delaware Court of Chancery ruled in part for Fletcher, but deferred on the decision for damages until each party had submitted its proposal. In its subsequent ruling, the court described Fletcher's subsequent submission as "cartoonish", but acknowledged that a breach had indeed occurred.

The court ultimately held that Ion had to pay Fletcher $300,000. This is three times the amount that other lenders were paid for granting permission for Ion's bridge financing to move forward. The court pointed out another case where an unharmed company was awarded only $1.00 for a breach of contract suit, but in this case the court chose a higher payment amount.

A lesson to be learned from this case is that a party that is considering a willful breach of contract, even if the breach benefits the other party, should consider the consequences of its actions. Even if damage cannot be shown, the party may still be held responsible for injunctive relief and possibly other non-monetary remedies. Input from a business lawyer can be very valuable in developing an understanding of the potential results of such a decision.

Source: Forbes, "When A Breach Is A Benefit", Oliver Herzfeld, April 23, 2014

No Comments

Leave a comment
Comment Information

DISCLAIMER: This website is designed to provide only general information; nothing contained herein constitutes legal advice nor is it an offer of legal representation. Use of this website is not intended in any way to create or convey the impression that such use of the website by any person, organization, or entity of any nature and/or kind constitutes any attorney-client relationship whatsoever and any information provided in this website shall not constitute legal advice. The use of any electronic communication available through this website with the Law Office of Richard L. Downey or any person associated with this website shall not constitute attorney-client relationship nor will any communication received by the Law Office of Richard L. Downey constitute an attorney-client communication. The Law Office of Richard L. Downey cannot make any guarantees as to the accuracy or currency of any information contained in or created in this website or the use of any link to another website contained in this website. The information that you obtain at this website is not, nor is it intended to be legal advice. You should consult a lawyer for individual advice concerning your own particular situation.

*The National Board of Trial Advocacy is accredited by the American Bar Association. Currently there is no procedure in the Commonwealth of Virginia for approving certifying organizations.