Contract Law and Contract Disputes in Minnesota

Contract disputes generally arise due to one party accusing the other that it failed to perform as promised.  In Minnesota, a contract is defined as being a promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.  Restatement, Second of Contracts § 1.  People are often surprised to learn that oral agreements are just as valid as written agreements (except for certain kinds of agreements that must be in writing, which is discussed below).

In any event, generally speaing, contracts are governed by one of two sets of laws depending upon the nature of the contract.  If the contract is one involving goods (think: anything movable e.g., car, household items, boats etc.), Minnesota Statute § 336.2-101 et al. will govern the parties’ rights and obligations.  However, if the contract does not involve the sale of goods, and, instead, involves real estate or services (e.g., employment agreements), the contract will be governed by the common law.

To recover on a breach of contract claim, a plaintiff  must demonstrate: (1) a contract was formed; (2) plaintiff performed any conditions precedent; and (3) the defendant breached the contract.  Commercial Assocs., Inc. v. Work Connection, Inc., 721 N.W.2d 772, 782 (Minn. Ct. App. 2006).

Whether a party performed according to the terms of the agreement or failed to perform is usually a highly fact-intensive question.  Regardless of whether a party performed, sometimes, the alleged breaching party will claim certain defenses.

One such defense is the statute of frauds, which refers to the requirement that certain kinds of contracts be memorialized in a signed writing, such as: (1) contracts for the sale of goods for the price of $500 or more; (2) contracts which cannot be performed within one year; (3) contracts for the transfer of an interest in land;  and (4) contracts that obligate a party to be a surety (i.e., guarantor). Minn. Stat. § 336.2-205.  There are exceptions to the foregoing and the inquiry is fact intensive, but usually involves some form of performance by the party alleged to have breached the agreement in order to get around the statute of frauds.  The performance is treated as evidence that an agreement did exist.

Another commonly employed defense is the statute of limitations, which is a statute that sets forth the maximum time after an event that legal proceedings based on that event may be initiated.  In Minnesota, generally a plaintiff has four (4) years to start an action for breach of contract against a defendant if the contract is for the sale of goods, or six (6) years for all other contracts, subject to some exceptions.  Minn. Stat. §§ 541.05 and 336.2-725.

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