Contracts Category Archives — The Virginia Business Litigation Blog Published by Virginia and Washington, D.C. Litigation & Appeals Attorney

June 6, 2025

Anticipatory Breach and Adequate Assurance in Virginia

Parties to long-term service contracts often face considerable uncertainty when signs emerge that the other party may not follow through on its obligations. At common law, a party may bring an action for anticipatory breach only when the other party’s repudiation is “clear, absolute, and unequivocal”. Courts have long demanded a high threshold for such a claim, in part to guard against frivolous accusations of breach based on mere suspicion or miscommunication. But this stringent standard gives rise to a critical practical dilemma: what should a party do when it reasonably suspects the other party is not going to perform, yet cannot point to any definitive repudiation? Suppose, for example, that a contractor repeatedly misses deadlines, stops responding to communications, and is rumored to be insolvent—but has not explicitly stated an intent not to perform. Has that party repudiated? Under traditional common law principles, perhaps not. But the aggrieved party is left in a perilous bind: do they continue investing time, money, and resources into a contract that may collapse, or do they terminate the agreement and risk being accused of breach themselves?

This is precisely the kind of commercial uncertainty that the Restatement (Second) of Contracts § 251 and Uniform Commercial Code § 2-609 aim to mitigate. (See Virginia Code § 8.2-609). These doctrines create a mechanism for managing contractual insecurity without requiring parties to wait helplessly for either full breach or explicit repudiation. Under both frameworks, when one party has “reasonable grounds for insecurity” regarding the other’s performance, it may demand “adequate assurance” that the other will fulfill its obligations. This is not a demand to terminate, but a demand for clarity. If the other party fails to provide such assurance within a “reasonable time”—defined by the U.C.C. as not to exceed thirty days—that failure itself may be treated as a repudiation. This shifts the analysis from one focused solely on the subjective intentions of the potentially breaching party, to one that also accounts for the objective commercial realities faced by the insecure party. It empowers the party to take protective measures—up to and including suspending performance—without having to meet the virtually unreachable threshold of proving an unequivocal anticipatory breach at common law.

April 26, 2025

No Contract Without Meeting of the Minds

by Lee E. Berlik

In Virginia, as in other states, there must be a “meeting of the minds”—mutuality of assent—before a contract will be formed. This concept of mutual assent requires that the parties have a common, distinct and unambiguous intention regarding the material terms of the agreement. (See Phillips v. Mazyck, 273 Va. 630, 636 (2007)). To determine whether mutual assent has been reached sufficient to form an enforceable contract, courts look to the parties’ words and actions. Before finding a meeting of the minds has been reached, courts will want to see evidence that the parties both communicated their intentions to each other. A party’s internal, private thoughts will not be considered.

The Court of Appeals decided a case last week demonstrating these principles. The case of Somers v. W.D. Campbell and Son, Inc. basically involved a situation where an individual believed an insurance company was obligated to maintain insurance on his daughter’s vehicle but the insurance company disagreed, pointing out that the parties never reached a meeting of the minds as to any such arrangement. The case was initiaed in general district court, was appealed to circuit court, and appealed again to the Virginia Court of Appeals. Each court reached the same conclusion: that without a meeting of the minds, no contract was ever formed.

July 28, 2023

Defenses to Contract Actions in Virginia

by Lee E. Berlik

So you got sued for breach of contract. There’s no need to panic. Your legal rights may include a number of valid defenses to the claim, some of which may not be readily obvious. Knowing when to assert these defenses can make the difference between losing a large monetary judgment and getting the case dismissed at the outset. Before you write the plaintiff a check in whatever amount is being demanded in the lawsuit, consider whether one or more of these contract defenses may apply to your situation. There may be perfectly valid reasons why you don’t actually owe that money.

Void or Voidable Contract

A void contract is considered a nullity and has no legal effect. A contract made in violation of a Virginia statute, for example, would be illegal and therefore void. For example, contracts for the payment of interest on a loan will be deemed void if the interest rate is unlawfully high. (See Va. Code § 6.2-303). A plaintiff who brings an action based on a void contract is not entitled to recover damages, even if that contract was breached. A void contract can’t be validated or ratified. A voidable contract is one that starts off as a valid, legal contract, but which permits one or both of the parties to disaffirm or otherwise avoid the obligations created by the contract.

July 8, 2022

Interior Designers’ Unauthorized Markups May Be Grounds for Legal Action

by Lee E. Berlik

For homeowners, it can be overwhelming to furnish and accessorize a home without the assistance of a professional interior designer. Trying to pick paint colors, wallpaper, flooring, lighting, and furniture without professional assistance is not for the faint of heart. Unfortunately, there are some unscrupulous interior designers out there who prey on well-to-do homeowners having the means of affording their services. Some interior designers will use deception to convince their clients that furnishings and other materials cost more than they really do, knowing that their customers are trusting them to design their home with their best interests in mind and that they will likely pay whatever invoice is presented to them, no questions asked. On occasion, though, a homeowner will question the charges reflected on an interior designer’s invoice. Recent case law establishes that deceptive behavior like marking up the cost of goods can lead to liability for both breach of contract and violation of the Virginia Consumer Protection Act.

Consider the case filed against Robert Shields Interiors by Dr. Tanya M. Johnson. Johnson hired Robert Shields to provide professional interior design, space planning, and decorating services (including purchasing furniture) for her home in McLean, Virginia. Although the contract allowed Shields to charge Johnson 10% extra on shipping and handling charges, the contract did not allow for any other markups. Johnson alleged that Shields breached their agreement in many ways, including: (a) he charged her for some furniture that was never delivered; (b) he sent her some items in the wrong color; and (c) he charged her unauthorized and undisclosed markups on various items. Discovery revealed that Shields was secretly marking up most of the furniture sourced for Johnson by anywhere from 35 to 100 percent. He charged $4800 for a chaise lounge that only cost him $2481. He charged his customer $11,000 for a table that only cost him $5999.40.

January 29, 2022

Put Your Contracts In Writing

by Lee E. Berlik

If it’s important, put it in writing. Seems like common sense, doesn’t it? Yet you’d be surprised how much business gets done in the absence of a written agreement. Legally speaking, written contracts aren’t strictly necessary in many situations. A contract will exist, regardless of whether reduced to writing, if the evidence shows an offer was made and accepted, that legally sufficient consideration was exchanged, and that both parties agreed on all material terms. The statute of frauds requires that certain types of contracts–like real estate contracts and contracts for the sale of goods worth over $500–be in writing or supported by written evidence, but contracts not covered by the statute of frauds are enforceable in Virginia even if they are purely oral. (See Va. Code §§ 8.2-201, 11-2). But why would you want to go through the trouble of having to prove the existence of a verbal agreement? The whole point of entering into a contract is to acquire a legally enforceable right. If the other party breaches the agreement and you need to enforce your rights in court, you’ll need to be able to prove the existence of a valid contract, that it was breached by the other party, and that you were damaged as a result. Proving these three things is a lot easier if the terms of the agreement are reflected in a document signed by both parties.

As I read the recent opinion in Monogram Snacks Martinsville, LLC v. Wilde Brands, Inc. (a case that involved a dispute between two snack-food manufacturers, one of which is one of the largest in the country), I was surprised to learn the parties never bothered to put the terms of their agreement in writing. As a result, when Monogram decided to sue Wilde for breach of contract, it had to go through a whole ordeal to convince the court that a contract even existed in the first place.

December 4, 2020

Participants in Business Expectancy Can’t Tortiously Interfere

by Lee E. Berlik

Virginia recognizes a cause of action against those who tortiously interfere with the contractual expectancies of another. To prove tortious interference with business expectancy under Virginia law, a plaintiff must show (1) the existence of a valid business expectancy; (2) knowledge of the expectancy on the part of the interferor; (3) intentional interference inducing or causing a breach or termination of the expectancy; (4) that the defendant employed improper methods when engaging in the intentional interference; and (5) resulting damage to the party whose expectancy has been disrupted. (See Dunlap v. Cottman Transmission Sys., LLC, 287 Va. 207 (2014)). Not long ago, the Virginia Supreme Court clarified that “[a]n action for tortious interference with a contract or business expectancy…does not lie against parties to the contract, but only lies against those outside the contractual relationship, i.e., strangers to the contract or business expectancy.” (See Francis Hosp., Inc. v. Read Props., LLC, 296 Va. 358 (2018)). This means that parties directly involved in the business expectancy may not be held liable for tortious interference with that expectancy.

Last month, the Eastern District of Virginia dismissed a count of tortious interference against a staffing company after it found that the staffing company was not really a stranger to the expectancy. Here’s what happened, according to the opinion issued in ITility, LLC v. The Staffing Resource Group, Inc.

June 13, 2020

Source-of-Duty Rule May Apply to Bar Fraud Claim Inextricably Entwined with Contractual Duties

by Lee E. Berlik

If you sue someone for fraud, you can win punitive damages in addition to regular compensatory damages. If you’re suing only for breach of contract, punitive damages are a no-go. As punitive damages can add up to $350,000 to the value of the plaintiff’s claim, plaintiffs naturally try to add fraud claims to their breach-of-contract lawsuits whenever possible. The “source of duty” rule, however, limits the circumstances under which plaintiffs can pursue such a strategy. The rule provides that tort claims (like fraud) can only be pursued if the source of the duty allegedly breached is the common law and not a contract entered into between the parties. The Virginia Supreme Court has clarified in recent years that if a fraudulent misrepresentation is made within a contract, the plaintiff is limited to contract remedies, but if a misrepresentation is made for the purpose of inducing another party to enter into a contract, a separate fraud claim can be pursued.

If a fraudulent misrepresentation is made before a contract even comes into existence, it’s a pretty good bet that you’re dealing with a separate fraud claim and won’t be limited to contract remedies. After a contract is formed, however, it can be tricky to determine the source of the duty violated. One reason for this is that courts have applied the source-of-duty rule to exclude fraud claims when they are based on misrepresentations that are closely related to promises made within the contract, even if the misrepresentations are not made expressly therein. (See Tingler v. Graystone Homes, Inc., 834 S.E.2d 244, 257–58 (Va. 2019) (noting that “a putative tort can become so inextricably entwined with contractual breaches that only contractual remedies are available)). If a fraudulent act “arises out of” a contractual relationship and the damages caused by the fraud also arise out of that relationship, that can be enough for application of the source-of-duty rule.

April 11, 2020

Unjust Enrichment vs. Quantum Meruit

by Lee E. Berlik

Express contracts are easy enough to understand. An express contract is a legally enforceable agreement formed by an exchange of promises, the terms of which are declared, either orally or in writing, at the time the agreement is formed. A mutual meeting of the minds is required, and the agreement must be supported by consideration. If I promise to pay you $10 to wash my car, and you accept my offer and proceed to wash my car, we’ve formed a contract and I am legally obligated to fork over that $10. But what if you just decided on your own to wash my car without discussing it with me first? Or maybe I ask you to wash my car and you accept, but we never discuss price? In situations like these, I may still be required to pay you a fair price for the service you provided, even though we never actually formed a contract. The legal concepts involved are known as unjust enrichment and quantum meruit. Let’s review what these related-but-distinct terms mean.

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December 19, 2019

Fraudulent Inducement Claims Not Covered by Source-of-Duty Rule

by Lee E. Berlik

Many lawyers pursuing business litigation on behalf of their clients will file a whole panoply of claims rather than content themselves with a single count for breach of contract. As the law generally permits a wider range of remedies (and higher damages awards) for tort claims like fraud and tortious interference, plaintiffs seeking to enforce contract rights in court will often sue for various tort claims in addition to breach of contract. Sometimes this works and sometimes it doesn’t. Courts are guided by various principles to help them weed out contract-based claims disguised as tort claims. One such principle is known as the “source of duty” rule.

When a plaintiff alleges that the defendant violated some duty owed to him, the court will examine the source of the duty allegedly violated. If the source of the duty is a contract entered into by the parties, as opposed to common law or some provision of the Virginia or United States Code, the court will treat the claim as one for breach of contract and limit remedies accordingly. Of course, there are circumstances in which a defendant can both breach a contract and commit a tort by violating a common-law duty. It is up to the court, however, to dismiss any tort claims based on the alleged violation of a duty that exists solely by virtue of a contractual agreement. (See Preferred Sys. Sols., Inc. v. GP Consulting, LLC, 284 Va. 382, 408 (2012)).

October 29, 2019

Waiving the Statute of Limitations: Harder than You Might Think

by Lee E. Berlik

As a general rule, legal rights may be waived by contractual agreement. The protection afforded by statutes of limitations may be waived like other rights, but only in very narrow circumstances, due to a Virginia law that few know about. The General Assembly decided to make it a bit more difficult to waive a statute of limitations than some other rights, and enacted Virginia Code § 8.01-232, which states in pertinent part as follows:

Whenever the failure to enforce a promise, written or unwritten, not to plead the statute of limitations would operate as a fraud on the promisee, the promisor shall be estopped to plead the statute. In all other cases, an unwritten promise not to plead the statute shall be void, and a written promise not to plead such statute shall be valid when (i) it is made to avoid or defer litigation pending settlement of any case, (ii) it is not made contemporaneously with any other contract, and (iii) it is made for an additional term not longer than the applicable limitations period.

Now that’s a pile of nearly incomprehensible legalese. One of the purposes of this blog, however, is to help people understand stuff like this, so let me try to decode it for you.