Contracts serve as the foundation and structure for any relationship. These formal agreements govern the responsibilities and obligations of each party. By setting clear expectations for everyone involved in a transaction or other arrangement, contracts help businesses across South Dakota avoid misunderstandings, and thereby lessen the likelihood of disputes, which are often costly. It is like the old adage: Good fences make good neighbors.

Accurate information and representations are key to any contract. Under South Dakota law, both parties to a contract owe the other a duty of good faith and fair dealing. This includes ensuring that information and representations conveyed in connection with entering into the agreement are truthful. But occasionally, one party may enter into an agreement based on information that, without any wrongful intent by the other party, turns out to be incorrect or inaccurate.

Not a direct lie, but not the truth either

Negligent misrepresentation occurs when one party makes a statement without reasonable grounds for believing that the statement is true. When this occurs, they may be negligently misrepresenting the facts at hand without directly lying.

Keep in mind that a person’s opinion or pitch designed to entice a buyer—sometimes referred to as “puffing”—does not necessarily constitute a misrepresentation. To qualify as negligent misrepresentation, the statements in question must generally be aimed at getting the other party to rely on the statement to his/her detriment, perhaps by agreeing to purchase something.

For instance, this could occur during contract negotiations if another party made a statement about the industry or market without having any reason to believe it was true in an effort to persuade you to enter into a contract. If you suffered a financial loss or were otherwise harmed because of the negligent statements made, you may be able to hold the other party liable for the misrepresentation to recoup your losses.

Proving your case

Negligent misrepresentation can be difficult to prove.  In South Dakota, a party must prove the following to recover for negligent misrepresentation:

1. The defendant made a representation as a statement of fact;
2. The representation was untrue;
3. The defendant did so without reasonable grounds for believing the statement or representation to be true;
4. The defendant did so with the intent to induce a particular action by the plaintiff;
5. The plaintiff changed his/her position with actual and justifiable reliance on the statement or representation; and
6. The plaintiff suffered damage as a result.

Mitigating risk with due diligence

Business transactions are not without risk, but entering into an agreement under false or incorrect assumptions can result in significant financial consequences. When something seems too good to be true, it often is. Performing your due diligence and thoroughly reviewing a contract before signing can prevent a contract dispute stemming from misinformation later on. If you believe someone negligently represented facts to you when you entered into a contract, you are welcome to call the attorneys at Thomas Braun Bernard & Burke, LLP.

Written contracts are important for both individuals and businesses. This is true whether an individual is having his/her home remodeled, a small business is purchasing equipment for its operation, or a multi-million dollar business is taking over another business. Effective contracts establish the rules of a transaction, relationship, or operation, and, by doing so, dramatically lessen the chance of confusion and disagreements – and potentially lawsuits – down the road.

While a breach of a contract by another party is always frustrating, it can be devastating if the nature or subject of the transaction is significant. In fact, regardless of whether the breach was accidental or intentional, in certain circumstances, a breach of contract can put an individual’s or business’s financial viability at risk. If an individual or business believes that another party has breached a contract, the question then becomes: Do they have a case?

Here are three elements of a breach of contract case.

When an individual or business believes that another party has breached a contract, the first step is to review the contract (including any amendments, addendums, etc.) to confirm each party’s rights and obligations. Then, the individual or business should carefully review what happened, including reviewing all pertinent documents and communications (e.g. letters and e-mails) and what each party did (or did not do).

Once this information is known, a party can evaluate whether the other party may be liable for breach of contract. In South Dakota, three elements must be proven to prevail on a breach of contract claim.

1. There was an enforceable promise: In other words, was there a valid contract? This is typically demonstrated using the written contract that was entered into. It should be kept in mind, however, that a valid contract requires the presence of four elements: (a) parties that were capable of contracting; (b) each party consented to the contract; (c) the object of the contract was lawful; and (d) there was sufficient consideration.
2. The other party breached his/her/its promise (i.e., breached the contract): An effective contract should have clearly outlined the rights and obligations of each party. Therefore, to prove that the other party breached the contract, one must show (a) the other party’s obligation(s) as set forth in the contract, and (b) how the other party failed to fulfill that obligation(s). For example, if a contract stated that a manufacturer would provide 100 fully functional items of equipment by a certain date, and the manufacturer provided only 80 items, the manufacturer breached its promise.
3. Damages resulted from the breach: It is not enough to prove that the other party breached some aspect of the contract. In order to prevail on a breach of contract claim, one must also prove that he/she/it suffered damages as a result of the breach. For example, if a contractor breached a contract to remodel a home, the homeowner’s damages might be the cost to have faulty/defective work corrected, or, if the work was not completed, the cost of having another contractor complete the project. Needless to say, if another party breaches a contract, it is important to keep all documents reflecting the damages (i.e., financial harm or effects) that resulted from the breach – whether that is invoices from another contractor that had to be hired, receipts reflecting purchases that had to be made, or even financial statements demonstrating that the other party’s breach resulted in a loss of income to a business.

As you can see, successfully bringing a claim for breach of contract against another individual or business requires proving three critical elements. That is why it is a good idea to consult with an attorney who is experienced in contracts and the enforcement of contracts.

The success of any business can be boiled down to relationships. Partnerships are challenging endeavors that can make or break a company. Many of today’s most successful companies were founded by mutually determined entrepreneurial leaders who cultivated great success through patience and commitment.

The key to a successful business partnership is finding the right partner(s), i.e., person(s). In a business climate where 50% of small businesses fail by the fifth year, a strong relationship with your business partner(s) is vital for long-term success. So, how can South Dakota business owners proactively develop dynamic and effective business partnerships?

Choosing a partner

Deciding on the person(s) you want to run your business with takes much more than selecting someone you get along with, or someone who thinks you have a great business idea. Give careful consideration to whether their business and leadership styles and ambitions match yours. Work with someone with whom you are compatible and who shares your passion and work ethic. Be assured of their loyalty, confidence, commitment and reliability.

Qualities of a good business partnership

There are more ingredients for a successful partnership that are part of a stable and profitable business, including:

• Vision and mission. The most effective partnerships develop and implement a shared vision of the company. It can be useful to create a written vision statement that guides your work, outlines specific goals and communicates the partnership’s overarching purpose, philosophy and long-term aspirations.
• Clarify roles and responsibilities. To ensure maximum use of you and your partner’s time, and to avoid duplicating efforts, clarify who will be responsible for what and divvy up tasks. Even if roles seem apparent, it’s a good idea to define them in writing, so there is no room for misunderstanding.
• Complementary traits. The best partnerships involve leaders who have skill sets that complement and support one another. Complementary skills can make it easier to plan, start, grow and accelerate business development.

A strong partnership can make a tremendous impact on your business. It is essential to work with someone who can help balance the leadership equation. When you find the person who fits, you can both enjoy the fruits of your passion.