Breach of Contract: Steps to Take Before Filing a Lawsuit in Nevada
When a supplier repeatedly misses delivery dates, a tenant stops paying rent, or a buyer refuses to close, a business owner's first instinct is often to file suit. Litigation may well be the right course. However, the work done before a complaint is filed frequently has as much influence on the outcome as anything that may occur afterward.
Below, the attorneys at ABW Firm outline the steps Las Vegas and Nevada businesses should take before filing a breach of contract lawsuit. This article provides general information only; the terms of your contract and the specific facts of your dispute will determine what applies.
Step 1: Review the Contract Carefully
Many contract disputes turn on the difference between what a party recalls agreeing to and what the signed agreement actually provides. Before asserting that the other party is in breach, review the executed agreement in full, with particular attention to the following provisions:
Notice and cure. Many commercial contracts require written notice of default and give the other party a defined period, often 10 or 30 days, to cure.
Method of notice. If the contract requires notice by certified mail to a designated address, notice by email may not be sufficient.
Mediation or arbitration. Some contracts require mediation as a condition to filing suit, and others require that disputes be resolved by arbitration. Under Nevada law, a written agreement to arbitrate is generally "valid, enforceable and irrevocable," subject to limited exceptions. NRS 38.219(1).
Venue and governing law. The contract may require that any action be filed in a particular county or state.
Attorney's fees. A prevailing party fee provision can make a modest claim worth pursuing, but it also increases exposure if the claim is unsuccessful.
Limitations on damages or time to sue. Some agreements cap recoverable damages or purport to shorten the period for bringing a claim.
Failing to satisfy a contractual prerequisite, such as a cure period, may give the other party a defense and, in some circumstances, may place the non-complying party in breach.
Step 2: Confirm That a Viable Claim Exists
To prevail on a breach of contract claim, a plaintiff generally must show "(1) the existence of a valid contract, (2) a breach by the defendant, and (3) damage as a result of the breach." Saini v. Int'l Game Tech., 434 F. Supp. 2d 913, 919-20 (D. Nev. 2006) (citing Richardson v. Jones, 1 Nev. 405 (1865)). A court will also consider the plaintiff's own performance. If the plaintiff stopped paying or performing first, the defendant may argue that its own performance was excused.
Whether a breach is material is often decisive. The Nevada Supreme Court has explained that "one party's material breach of its promise discharges the non-breaching party's duty to perform." Cain v. Price, 134 Nev. 193, 415 P.3d 25 (2018). A contractor who abandons a project midway has likely committed a material breach; a contractor who completes a minor punch-list item a week late likely has not. A minor breach may still support a claim for damages, but it generally does not permit the other party to stop performing. A business that treats a minor breach as grounds for termination may find itself defending the lawsuit rather than bringing it.
Step 3: Determine the Filing Deadline
Nevada generally allows six years to bring "[a]n action upon a contract, obligation or liability founded upon an instrument in writing" and four years for a contract "not founded upon an instrument in writing." NRS 11.190(1)(b), (2)(c). Contracts for the sale of goods are governed by Nevada's version of the Uniform Commercial Code, which requires that an action "be commenced within 4 years after the cause of action has accrued," and provides that the claim accrues "when the breach occurs, regardless of the aggrieved party's lack of knowledge of the breach." NRS 104.2725.
A business should not assume it has the full statutory period. Some contracts purport to shorten the time to sue, and the enforceability of those provisions depends on the circumstances. Certain claims are also subject to their own requirements. A construction defect claim generally requires statutory pre-suit notice under NRS 40.645, and a contractor or supplier seeking to record a mechanics' lien must generally do so within 90 days after the latest of completion of the work of improvement, its last delivery of materials, or its last performance of work. NRS 108.226(1). Evidence and witnesses also become harder to locate over time, so a potential claim should be evaluated promptly.
Step 4: Assemble the Evidence
Records should be collected and organized now, in the form a court or arbitrator would expect to review them:
The executed contract, amendments, change orders, and related proposals or purchase orders
Email, text messages, and messaging platform communications regarding the transaction and the problems that arose
Invoices, proof of payment, and accounting records showing the amount owed
Photographs, video, and inspection reports documenting incomplete or defective work
Notes of telephone calls and meetings, prepared as soon as practicable after each conversation
All relevant records should be retained, including unfavorable ones. Once litigation is reasonably foreseeable, the parties have a duty to preserve relevant evidence, and Nevada law presumes "[t]hat evidence willfully suppressed would be adverse if produced." NRS 47.250(3).
Step 5: Take Reasonable Steps to Mitigate Losses
A party harmed by a breach generally may not allow its damages to accumulate. As the Nevada Supreme Court has stated, "[a] party cannot recover damages for loss that he could have avoided by reasonable efforts." Conner v. S. Nev. Paving, Inc., 741 P.2d 800 (Nev. 1987). If a supplier fails to deliver a critical component, for example, the buyer is generally expected to make reasonable efforts to obtain it elsewhere rather than allow the project to remain idle.
The business should document its mitigation efforts and their cost. Under Conner, "[t]he burden of proving failure to mitigate is on the breaching party," and a clear record of reasonable efforts makes that burden more difficult to carry. Id.
Step 6: Calculate Damages Realistically
Contract damages in Nevada are intended to "place the plaintiff in the position he would have been in had the contract not been breached." Rd. & Highway Builders, LLC v. N. Nev. Rebar, Inc., 128 Nev. 384, 284 P.3d 377 (2012). Depending on the case, recoverable damages may include the unpaid contract balance, the additional cost of engaging a replacement to complete the work, or, in some cases, lost profits. Each element of damages must be supported by evidence.
Several additional considerations apply:
Punitive damages generally are not available for a breach of contract. Nevada's punitive damages statute applies to "an action for the breach of an obligation not arising from contract." NRS 42.005(1).
Absent a written contract rate, interest generally accrues on money owed under a contract "from the time it becomes due" at the prime rate plus 2 percent. NRS 99.040(1)(a). Judgments also accrue interest. NRS 17.130(2).
Attorney's fees generally are recoverable only where authorized by statute, rule, or contract. Albios v. Horizon Cmtys., Inc., 122 Nev. 409, 132 P.3d 1022 (2006).
Step 7: Weigh the Cost of Litigation Against the Likely Recovery
A judgment is only as valuable as the ability to collect it. Before filing, a business should consider the following:
Does the other party have assets, income, or insurance sufficient to satisfy a judgment?
Is the amount in dispute large enough to justify the cost of litigation?
Is a more efficient forum available? Nevada justice courts hear contract actions where the sum claimed does not exceed $15,000, and small claims court hears claims up to $10,000. NRS 4.370(1)(a); NRS 73.010 . Most district court actions in which the amount in issue does not exceed $100,000 per plaintiff must first be submitted to nonbinding arbitration. NRS 38.250(1)(a).
Does the business intend to continue its relationship with the other party?
A Nevada judgment is generally enforceable for six years and may be renewed, which can be valuable if the defendant's financial condition later improves. NRS 11.190(1)(a) ; NRS 17.214. Collectability should nonetheless be evaluated before suit is filed.
Step 8: Send a Demand Letter
When informal efforts have failed, a demand letter from counsel often prompts a more serious response. An effective demand letter identifies the specific contract provisions that were breached, states what the business requires to resolve the matter, and sets a deadline for a response. It also signals that the business is prepared to pursue its remedies.
A demand letter may lead to productive negotiations. If it does not, the business will be in a stronger position to file, having satisfied any notice requirements in the contract.
Litigation opponents who try to solve their legal disputes without the assistance of counsel often regret it. The effort to avoid relatively minimal costs of representation when hundreds of thousands of or millions of dollars are at stake can be the difference between winning and losing.
Mike Beede, Esq., Partner, Andersen Beede Weisenmiller, Commercial Litigation and Real Estate, and Complex Transactions
Frequently Asked Questions
What is the difference between a material breach and a minor breach?
A material breach defeats a central purpose of the agreement, such as a failure to pay or a failure to deliver the subject of the contract. A minor breach is a lesser shortfall, such as a brief delay on a secondary obligation. Either may support a claim for damages, but only a material breach generally discharges the non-breaching party's duty to perform. Cain v. Price, 134 Nev. 193, 415 P.3d 25 (2018).
How long do I have to sue for breach of contract in Nevada?
Generally, six years for a written contract and four years for an oral contract under NRS 11.190, and four years from the date of breach for contracts for the sale of goods under NRS 104.2725. A contract provision or another statute may shorten the available time, so the deadline should be evaluated early.
Can I recover pain and suffering or punitive damages for breach of contract?
Generally, no. Damages for breach of a commercial contract are typically limited to compensatory damages, meaning the amount necessary to place the non-breaching party where it would have been had the contract been performed. NRS 42.005(1) limits punitive damages to obligations "not arising from contract." Separate tort claims arising from the same facts, such as fraud, may be treated differently.
Can I recover my attorney's fees if I win?
Only in certain circumstances. Nevada generally requires each party to bear its own fees unless a statute, rule, or contract provides otherwise. Albios v. Horizon Cmtys., Inc., 122 Nev. 409, 132 P.3d 1022 (2006). A prevailing party fee provision in the contract can change that result.
Ready to Take Action on a Breach of Contract?
Before filing suit, a business should understand what its contract requires, what its evidence establishes, and what it can realistically recover. Answering those questions at the outset reduces cost and avoids surprises later in the case.
The commercial litigation attorneys at ABW Firm advise Las Vegas and Nevada businesses on breach of contract claims, from the initial demand letter through trial. If another party has failed to perform under an agreement, we can review the contract with you and discuss your options.
