Breach of Contract Lawyer

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Elements of a Contract and Breach

All contracts, whether they be for sale of goods or for the sale of securities, have four essential elements. Without these four elements, a contract cannot be formed, and thus, an investor cannot file a successful cause of action for breach. These elements are:

Offer
Acceptance
Consideration
Mutual Assent

An offer is a promise to act or refrain from acting, and it is only binding upon acceptance. Acceptance is the unequivocal agreement to the terms of the offer. When acceptance has commenced, a contract has been formed. Consideration is the bargained-for exchange. Each party provides some sort of value that induces the other person to enter into the contract. In order for a contract to be valid, there must be a meeting of the minds, i.e. mutual assent. Both parties must have had the requisite intent to enter into the contract at the time of formation.

When a broker acts in a way that deviates from the terms of the contract, a breach has occurred. Brokers can breach contracts with investors in a number of ways. An example of this could be if a broker failed to perform the terms outlined in a new customer agreement contract. Other examples could be if a broker failed to exercise due diligence or neglected to follow an investor’s instructions. There are three types of breach of contract actions:

Broker failed to perform promises contained in the terms of the agreement;
Broker engaged in conduct that made it impossible for another party to perform; or
Broker repudiates the contract, i.e. expresses intent not to perform

Remedies for Breach of Contract

The consequences of breach of contract actions are that in many cases, investors can recover damages from brokers. Consulting with a breach of contract lawyer is important for investors to obtain an honest assessment of what types of remedies are available to them based on the specific terms of their contracts. There are several remedies for investors who have suffered financial loss due to brokers who breach the terms of their contracts. Some of these remedies include:

Compensatory damages
Liquidation damages
Punitive damages

Compensatory damages are designed to compensate the investor for the broker’s breach. They include consequential damages and expectation damages. Consequential damages reimburse the investor for indirect costs that are related to the breach. Expectation damages are damages that the investor would have received if the terms of the contract had been followed. Some contracts contain liquidation clauses, which pre-determine an amount of damages to be distributed to the non-breaching party in the event of a breach. These are common in cases where damages are difficult to calculate. Punitive damages are rarely awarded in breach of contract cases. They are designed to punish a defendant’s intentional or malicious behavior.

FINRA Arbitration

The Financial Industry Regulatory Authority (“FINRA”) offers dispute resolution services to investors who have been victims of breach of contract. FINRA arbitration is similar to traditional litigation in that parties conduct discovery, present evidence, and are bound to an arbitrator’s final decision. Typically, FINRA arbitration is less expensive and time consuming than litigation. Arbitrators are usually more businesslike and pragmatic than jurors who tend to be less investor-friendly.

In order to file a FINRA claim that is eligible for an arbitration hearing, two documents must be submitted:

Statement of Claim
FINRA Submission Agreement

The statement of claim describes the dispute, identifies parties to the dispute, and addresses the type of relief that is requested. The FINRA submission agreement also names the parties to the dispute. It acknowledges that FINRA is the organization that will conduct the proceedings, and if a hearing is held, the final ruling will be binding.