Business Contracts Breach of Contract if One Party is Indicted on Fraud/Theft Charges?

[allstarmp]

Situation:

I own a motorsports company that provides motorsports events to county fairs.

A fair recently contacted me about another motorsport company (we'll call them "Company X"). They currently have a contract with Company X to provide the fair with a motorsport event.

The owner of Company X has been indicted on 101-counts of Fraud and Theft in relation to a totally separate company that the owner of Company X also owns. I have the report but it won't let me post links in here, so I can send via e-mail if necessary.

The owner of Company X is also under order of repossession for the monster trucks he was going to provide the fair. Again I can provide the link to show this documentation via e-mail.

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The fair is already in a signed contract with Company X, and Company X claims (and can) get other monster trucks to perform at the fair event in lieu of the trucks that are repossessed.

The fair is asking me if there is any way they can get out of the contract with Company X and not be potentially sued for breach of contract? They are very worried about being burned by Company X is some fashion, but no detrimental actions or breach of their contract has been committed by Company X.

I do not have access to the contract, and the contract was written in the state of Arizona.

 

[fredrikklaw]

Anticipatory Repudiation!

Well, the "fair" can terminate the contract with company X without the fear of being sued for breach of contract by them based on Contract Law's doctrine of Anticipatory Repudiation (or anticipatory breach) which basically says and provides (paraphrasing here): when a party to a contract gives clear and unequivocal indication before the time for performance is even due, that he will not perform the promised act or is unable to perform the promised act, the non-breaching party has the option (or choice) to treat the breach as immediate and terminate the contract entirely and sue for damages.

But the fair has to be absolutely positive that the (anticipatory) breach is total, or material, and not just a minor breach and here is the difference. A minor breach is a failure of performance that does not affect the overall nature and quality of the contract and is synonymous with substantial performance and which does not justify termination of the contract. A total or material breach however, is a failure of performance that completely and utterly destroys the value and purpose of the contract and permits its termination.

If I understand correctly from your post, a motorsports contract with a fair is made up of a few components and is not limited in scope to just "monster trucks" and, may have to also provide (for example) dare devil motorcycle jumps; motor-cross, stock-car racing; and such and thus. In which case, the failure of company X to come up with monster trucks will not be deemed material or major enough to warrant termination of the entire contract unless the monster trucks are the entire contract.

However, (and you thought I was done talking) if the monster truck segment of the contract is so pivotal, or can be shown to be so absolutely central to the whole thing as to make other components of the contract dependant on it, then let the fair people go rip-rip-rip of the X-Papers and then have you John Hancock a new set of promises of performances.

So, the fair folks can move on the aforementioned premise of anticipatory breach, and not the 101 counts of fraud and theft which must surely be a world record, to nullify their contract with the X-Man, which simply begs one question: How is it that Mr. X is out contracting and adding to his tally in the free world instead of sharing a cell and soaps-on-ropes with Bernard Madoff at Camp Butner?

Anyways, do you really think someone with as stellar a resume as Senör Mal-101 has brass enough to sue anyone for breach of contract?

I think not!

fredrikklaw

 

[army judge]

My colleague and friend, fredrikklaw has done another stellar analysis.

I would offer the following advisory on repudiatory breach of contract (aka, anticipatory breach); be careful, very careful.

http://www.ashurst.com/doc.aspx?id_Content=1654


I would also advise the OP to tread very lightly, these waters can be filled with angry, hungry sharks.