Paige Kurtz

Breach of Contract or Unfair Business Practice?

As a victim of a breach of contract, a you will have varying feelings of disappointment, disgust, hate, and any number of other negative feelings toward the breaching party. More than likely, you will believe that you have been treated unfairly. You may uncover facts you believe show that the breaching party acted or operated a business in a dishonest or false manner. You may believe that you have uncovered the smoking gun that shows that the breaching party should be cast out of society. Such strong feelings are not unusual due to the disintegration of a contractual relationship.

In addition to an action for breach of contract, there may be other causes of action that arise due to the breaching party’s actions. Each of which are torts and also allow for a different measure of damages than that which would be available for a breach of contract. One of the most prevalent is to assert that the breaching party committed an unfair and deceptive trade practice. By its very name, it feels like it should fit most matters where a contract has been breached. However, despite the common feeling of the words “unfair” and “deceptive,” it is not so easy to prove this case and be awarded damages.

Recently, the North Carolina Court of Appeals decided the case of Heron Bay Acquisition, LLC v. United Metal Finishing, Inc., et al. (COA15-652, February 16, 2016). In this case Heron Bay entered into an asset purchase agreement with United Metal which included a “no-shop” clause. The “no-shop” clause generally stated that United Metal would not discuss a sale of its assets with any party other than Heron Bay during the term of the agreement. After some time in which the parties investigated the possibility of a sale, the agreement between the parties was terminated. After the termination, Heron Bay believed it had discovered that United Metal had discussed selling the business, during the term of the agreement, to a third party, in violation of the “no-shop” clause. Heron Bay subsequently filed a breach of contract action (based on other actions of United Metal) and a claim under the Unfair and Deceptive Trade Practices Act (“UDTPA”).

Heron Bay’s claim under the UDTPA was based solely on the breach of the “no-shop” clause. To show an UDTPA claim, a plaintiff must show (1) an unfair act, (2) in or affecting commerce, (3) which proximately causes injury. Further, case law in North Carolina states that an UDTPA claim is distinct from a breach of contract claim in that there must be egregious or aggravating circumstances. In this case, the Heron Bay was unable to show any aggravating circumstances; nothing other the pure breach of the contract. Heron Bay alleged that the deception on the part of United Metals was the failure to disclose that United Metals had spoken to other parties. Heron Bay also could not show any damages from the breach. Simply put, even though United Metals had talked with third parties, those discussions did not have any impact on Heron Bay’s relationship with United Metals. The deal had simply fallen apart for other reasons. As a result, Heron Bay was not damaged by the violation of United Metals and United Metals had not performed any egregious acts.

UDTPA claims require more than a simple breach; they require intentional concealment of material facts, dishonest acts, illegal acts. While some may think this is a high burden, the key is that a plaintiff is already protected from the breach due to its ability to recover on the breach of contract claim. UDTPA claims, while somewhat common, are more difficult in practice to prove. Despite all the anger and hard feelings, it may just be a breach. To learn more, consult with attorney to discuss the specific facts of your matter.

 

The foregoing is written for educational purposes only and should not be relied upon as legal advice. It should not be utilized as a substitute for the professional services of an attorney. If legal advice is required, the services of a professional should be sought.  Please contact Kurtz Law, PLLC for assistance with legal matters.