Breach of Contract Demand Letter - Arkansas

DEMAND LETTER - BREACH OF CONTRACT

State of Arkansas

[________________________________]
Attorneys at Law
[________________________________]
[________________________________], Arkansas [____]
Telephone: [________________________________]
Facsimile: [________________________________]
Email: [________________________________]
Arkansas Bar No. [________________________________]

SENT VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED
AND VIA FIRST-CLASS MAIL

[__/__/____]

[________________________________]
[________________________________]
[________________________________]
[________________________________], [____] [____]

Re: Formal Demand - Breach of Contract
Contract Date: [__/__/____]
Our Client: [________________________________]
Subject Matter: [________________________________]
Demand Amount: $[________________________________]

Dear [________________________________]:

This firm represents [________________________________] ("our Client") in connection with the above-referenced agreement dated [__/__/____] (the "Contract") between our Client and [________________________________] ("you" or "Breaching Party"). We write to formally notify you of your material breach of the Contract and to demand immediate cure and full compensation for all resulting damages.

PLEASE TAKE NOTICE: Under Arkansas law, this constitutes a formal demand. Failure to resolve this matter within the time period specified herein will result in the filing of a civil action in the appropriate Arkansas Circuit Court. Under Ark. Code Ann. § 16-22-308, the court may assess reasonable attorney fees to the prevailing party in any action to recover on a contract. Your exposure to fees, costs, interest, and damages increases substantially with litigation.

I. FACTUAL BACKGROUND AND CONTRACTUAL RELATIONSHIP

On or about [__/__/____], our Client and you entered into the Contract for [________________________________]. The material terms of the Contract include, but are not limited to:

☐ [________________________________]
☐ [________________________________]
☐ [________________________________]
☐ [________________________________]

Our Client has fully performed all obligations under the Contract, or has tendered performance, including but not limited to:

☐ [________________________________]
☐ [________________________________]
☐ [________________________________]

Despite our Client's full and timely performance, you have materially breached the Contract in the following respects:

A. First Breach

Contract Provision Breached: [________________________________]
Nature of Breach: [________________________________]
Date of Breach: [__/__/____]
Impact on Our Client: [________________________________]

B. Second Breach

Contract Provision Breached: [________________________________]
Nature of Breach: [________________________________]
Date of Breach: [__/__/____]
Impact on Our Client: [________________________________]

C. Additional Breaches (if applicable)

☐ [________________________________]
☐ [________________________________]

II. APPLICABLE ARKANSAS LAW - BREACH OF CONTRACT

A. Elements of Breach of Contract

Under Arkansas law, the elements of a breach of contract claim are: (1) the existence of a valid and enforceable agreement; (2) an obligation of the defendant arising under the agreement; (3) a violation or breach of that obligation by the defendant; and (4) resulting damages to the plaintiff. Rabalaias v. Barnett, 284 Ark. 527, 683 S.W.2d 919 (1985); Tyson Foods, Inc. v. Archer, 356 Ark. 136, 147 S.W.3d 681 (2004).

Our Client satisfies each element. The Contract is valid and enforceable. You had clear obligations that you failed to perform. Our Client has suffered quantifiable damages as a direct result.

B. Material Breach

Your breach is material, not merely incidental or trivial. Under Arkansas law, a material breach is one that goes to the essence of the contract and defeats the purpose of the agreement. See Poff v. Wal-Mart Stores, Inc., 64 Ark. App. 30, 978 S.W.2d 540 (1998). A material breach excuses the non-breaching party from further performance and entitles that party to recover all damages flowing from the breach.

C. Implied Covenant of Good Faith

Arkansas recognizes an implied covenant of good faith and fair dealing in every contract. See Hurst v. Great Plains Energy, Inc., 2009 Ark. App. 464, 324 S.W.3d 696 (2009). Your conduct in breaching the Contract also violates this implied duty.

D. Specific Performance (if applicable)

☐ Check if applicable: Where monetary damages are inadequate, Arkansas courts may order specific performance. See Pope County v. 60.39 Acres of Land, 304 Ark. 692, 805 S.W.2d 51 (1991). Specific performance is available for contracts involving unique subject matter, including real property and certain goods.

III. UCC PROVISIONS (If Contract Involves Sale of Goods)

☐ Check if applicable: If this Contract involves the sale of goods, the Arkansas Uniform Commercial Code (Ark. Code Ann. Title 4, Chapter 2) applies. Under Ark. Code Ann. § 4-2-725, the statute of limitations for breach of a sales contract is four (4) years from the date of tender of delivery. Additional UCC remedies include:

• Cover damages under Ark. Code Ann. § 4-2-712
• Market price damages under Ark. Code Ann. § 4-2-713
• Incidental and consequential damages under Ark. Code Ann. § 4-2-715
• Specific performance under Ark. Code Ann. § 4-2-716 (for unique goods)
• Right to reject nonconforming goods under Ark. Code Ann. § 4-2-601
• Revocation of acceptance under Ark. Code Ann. § 4-2-608

IV. DAMAGES

Our Client has suffered the following damages as a direct, proximate, and foreseeable result of your breach:

A. Direct/Compensatory Damages

Under Arkansas law, the measure of damages for breach of contract is the amount necessary to place the injured party in the position it would have occupied had the contract been fully performed. Dawson v. Temps Plus, Inc., 337 Ark. 247, 987 S.W.2d 722 (1999).

B. Consequential Damages

Consequential damages are recoverable under Arkansas law where they were within the contemplation of the parties at the time of contracting or were a natural and foreseeable consequence of the breach. See Dawson v. Temps Plus, Inc., 337 Ark. 247 (1999).

C. Incidental Damages

D. Prejudgment Interest

Under Ark. Code Ann. § 4-57-104, interest accrues at the contract rate or, if no rate is specified, at six percent (6%) per annum on all money due on any instrument in writing. For other obligations, the rate is also 6% per annum under Ark. Code Ann. § 4-57-104(a).

E. Attorney Fees and Costs

Under Ark. Code Ann. § 16-22-308:

"In any civil action to recover on an open account, statement of account, account stated, promissory note, bill, negotiable instrument, or contract relating to the purchase or sale of goods, wares, or merchandise, the prevailing party may be allowed a reasonable attorney's fee to be assessed by the court and collected as costs."

☐ Contractual provision for attorney fees: The Contract provides for recovery of attorney fees by the prevailing party.
☐ Statutory basis (Ark. Code Ann. § 16-22-308): This action qualifies for statutory attorney fee recovery.

F. Punitive Damages (if applicable)

Under Ark. Code Ann. § 16-55-206, punitive damages may be awarded where the defendant is found to have acted with malice or in reckless disregard of the consequences. Punitive damages are subject to a cap of three (3) times compensatory damages or $250,000 (for defendants with a net worth under $500,000) to $1,000,000 (for defendants with a net worth of $500,000 or more) under Ark. Code Ann. § 16-55-208.

☐ Check if applicable: Our Client reserves the right to seek punitive damages if evidence warrants.

G. Total Demand Summary

V. STATUTE OF LIMITATIONS

Under Arkansas law, the following statutes of limitation apply to breach of contract claims:

☐ Written contracts (Ark. Code Ann. § 16-56-111): Five (5) years from the date the cause of action accrues.
☐ Oral contracts (Ark. Code Ann. § 16-56-105): Three (3) years from the date the cause of action accrues.
☐ Sale of goods under UCC (Ark. Code Ann. § 4-2-725): Four (4) years from the date of tender of delivery.

The breach at issue occurred on or about [__/__/____]. This demand and any subsequent litigation are timely filed well within the applicable limitations period.

VI. MITIGATION OF DAMAGES

Our Client has taken reasonable steps to mitigate damages, including but not limited to:

☐ [________________________________]
☐ [________________________________]
☐ [________________________________]

Notwithstanding these mitigation efforts, our Client has sustained the damages set forth above. Under Arkansas law, the non-breaching party has a duty to exercise reasonable diligence to minimize damages, but this duty does not require extraordinary efforts or unreasonable expense.

VII. DEMAND

Within thirty (30) calendar days of your receipt of this letter, you must take the following actions:

☐ Cure the breach by performing the following specific actions:
- [________________________________]
- [________________________________]

AND/OR

☐ Pay the total sum of $[________________________________] representing all compensatory, consequential, and incidental damages, together with accrued prejudgment interest.

Payment shall be made by certified check or wire transfer payable to [________________________________] and delivered to:

[________________________________]
[________________________________]
[________________________________], Arkansas [____]

If you wish to discuss a structured resolution, please contact the undersigned within fourteen (14) calendar days to arrange a settlement conference.

VIII. CONSEQUENCES OF NON-COMPLIANCE

If you fail to cure the breach and/or remit full payment within the time specified above, our Client will, without further notice:

1. File suit in the appropriate Arkansas Circuit Court (or the United States District Court for the Eastern or Western District of Arkansas, if federal jurisdiction exists) seeking a judgment for all compensatory, consequential, and incidental damages;
2. Seek prejudgment interest at the contract rate or 6% per annum under Ark. Code Ann. § 4-57-104;
3. Recover attorney fees and costs under Ark. Code Ann. § 16-22-308 and/or the Contract;
4. Pursue all post-judgment remedies available under Arkansas law, including but not limited to garnishment of wages, levy on bank accounts, and liens on real and personal property;
5. Seek punitive damages where the evidence supports willful, malicious, or reckless conduct under Ark. Code Ann. § 16-55-206; and
6. Pursue any and all other remedies available at law or in equity, including specific performance, injunctive relief, and declaratory relief.

IX. DOCUMENT PRESERVATION NOTICE

YOU ARE HEREBY PLACED ON NOTICE that you must immediately preserve all documents, electronically stored information, and tangible items that relate in any way to the Contract, the subject matter thereof, and the breach described herein. This includes but is not limited to:

☐ All correspondence (email, text messages, letters, memoranda)
☐ All contracts, amendments, change orders, and related documents
☐ All financial records, invoices, receipts, and payment records
☐ All internal communications regarding the Contract or our Client
☐ All electronically stored information, including metadata
☐ All photographs, recordings, and other media

Failure to preserve relevant evidence may result in spoliation sanctions, including adverse inference instructions and monetary penalties under Arkansas law.

X. RESERVATION OF RIGHTS

This letter is not intended to be, and shall not be construed as, a waiver of any rights, claims, or remedies available to our Client under the Contract, at law, or in equity. Our Client expressly reserves all such rights, claims, and remedies, whether or not specifically referenced herein.

Nothing in this letter shall be construed as an admission of liability by our Client or as an acknowledgment that any claim you may assert against our Client has merit.

Govern yourself accordingly.

Very truly yours,

[________________________________]

By: _______________________________
[________________________________]
Arkansas Bar No. [________________________________]
Telephone: [________________________________]
Email: [________________________________]

Enclosures:
☐ Exhibit A - Copy of the Contract
☐ Exhibit B - Itemized Damage Calculations
☐ Exhibit C - Correspondence Regarding Breach
☐ Exhibit D - Evidence of Performance by Client
☐ Exhibit E - [________________________________]

cc: [________________________________] (Client)

Sources and References

• Ark. Code Ann. § 16-56-111 - Written contract limitation (five years)
• Ark. Code Ann. § 16-56-105 - Oral contract limitation (three years)
• Ark. Code Ann. § 4-2-725 - UCC sale of goods limitation (four years)
• Ark. Code Ann. § 4-57-104 - Prejudgment interest (contract rate or 6% per annum)
• Ark. Code Ann. § 16-22-308 - Attorney fees in contract actions
• Ark. Code Ann. § 16-55-206 - Standards for punitive damages
• Ark. Code Ann. § 16-55-208 - Punitive damages cap
• Rabalaias v. Barnett, 284 Ark. 527, 683 S.W.2d 919 (1985) - Elements of breach of contract
• Tyson Foods, Inc. v. Archer, 356 Ark. 136, 147 S.W.3d 681 (2004) - Elements of breach
• Dawson v. Temps Plus, Inc., 337 Ark. 247, 987 S.W.2d 722 (1999) - Contract damages measure