Breach of Contract Demand Letter - Arizona

DEMAND LETTER - BREACH OF CONTRACT

State of Arizona

[________________________________]
Attorneys at Law
[________________________________]
[________________________________], Arizona [____]
Telephone: [________________________________]
Facsimile: [________________________________]
Email: [________________________________]
State Bar of Arizona No. [________________________________]

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

[__/__/____]

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

Re: Formal Demand for Cure of Material Breach of Contract and Payment of Damages
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.

THIS IS A FORMAL DEMAND. UNDER A.R.S. § 12-341.01, IN ANY CONTESTED ACTION ARISING OUT OF A CONTRACT, EXPRESS OR IMPLIED, THE COURT MAY AWARD THE SUCCESSFUL PARTY REASONABLE ATTORNEY FEES. YOUR CONTINUED BREACH AND FAILURE TO RESOLVE THIS MATTER WILL RESULT IN SUBSTANTIAL FEE EXPOSURE IN ADDITION TO ALL OTHER DAMAGES. ADDITIONALLY, THE ARIZONA CONSTITUTION, ARTICLE 2, SECTION 31, PROHIBITS CAPS ON DAMAGES.

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 ARIZONA LAW - BREACH OF CONTRACT

A. Elements of Breach of Contract

Under Arizona law, to establish a claim for breach of contract, a plaintiff must prove: (1) the existence of a contract; (2) breach of the contract; and (3) resulting damages. Graham v. Asbury, 112 Ariz. 184, 540 P.2d 656 (1975); Chartone, Inc. v. Bernini, 207 Ariz. 162, 83 P.3d 1103 (App. 2004).

Our Client satisfies each of these elements. The Contract is a valid and enforceable agreement. You have failed to perform as required. Our Client has suffered quantifiable damages as detailed below.

B. Material Breach

Your breaches are material, not merely technical. Under Arizona law, a material breach is one that goes to the root or essence of the agreement and defeats the purpose of the contract. See Zancanaro v. Cross, 85 Ariz. 394, 339 P.2d 746 (1959). A material breach excuses the non-breaching party's further performance and entitles that party to all damages. Factors considered include: (a) the extent of non-performance; (b) the likelihood of cure; (c) the adequacy of compensating the injured party; and (d) the extent of the breaching party's partial performance.

C. Duty of Good Faith and Fair Dealing

Arizona recognizes an implied covenant of good faith and fair dealing in every contract. Rawlings v. Apodaca, 151 Ariz. 149, 726 P.2d 565 (1986). This covenant prohibits a party from doing anything to prevent the other party from receiving the benefits of the agreement or acting in a manner inconsistent with the other party's justified expectations. Your conduct constitutes a violation of this implied duty.

D. Specific Performance (if applicable)

☐ Check if applicable: Where monetary damages are inadequate, Arizona courts may order specific performance. See Mattison v. Johnston, 152 Ariz. 109, 730 P.2d 286 (App. 1986). Specific performance is a matter of right when the subject matter is unique (e.g., real property) or when damages cannot adequately compensate the injured party.

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

☐ Check if applicable: If this Contract involves the sale of goods, the Arizona Uniform Commercial Code (A.R.S. Title 47, Article 2) applies. Under A.R.S. § 47-2725, an action for breach of a sales contract must be commenced within four (4) years after the cause of action has accrued. Additional UCC remedies include:

• Cover damages under A.R.S. § 47-2712
• Market price damages under A.R.S. § 47-2713
• Incidental and consequential damages under A.R.S. § 47-2715
• Specific performance under A.R.S. § 47-2716 (for unique goods)
• Right to reject nonconforming goods under A.R.S. § 47-2601
• Revocation of acceptance under A.R.S. § 47-2608

IV. DAMAGES

Our Client has suffered the following damages as a direct, proximate, and foreseeable result of your breach. Under the Arizona Constitution, Article 2, Section 31, no law may limit the amount of damages recoverable.

A. Direct/Compensatory Damages

Under Arizona law, the measure of damages for breach of contract is the amount necessary to put the injured party in the position it would have been in had the contract been performed. Gilmore v. Cohen, 95 Ariz. 34, 386 P.2d 81 (1963).

B. Consequential Damages

Consequential damages are recoverable under Arizona law where they were within the contemplation of the parties or were a foreseeable result of the breach. See Frank Lloyd Wright Found. v. Kroeter, 697 F. Supp. 2d 1118 (D. Ariz. 2010).

C. Incidental Damages

D. Prejudgment Interest

Under A.R.S. § 44-1201, prejudgment interest accrues at ten percent (10%) per annum when there is no express contract fixing a different rate. Arizona courts have held that prejudgment interest is a matter of right on liquidated claims. Gemstar Ltd. v. Ernst & Young, 185 Ariz. 493, 917 P.2d 222 (1996).

E. Attorney Fees

Under A.R.S. § 12-341.01(A):

"In any contested action arising out of a contract, express or implied, the court may award the successful party reasonable attorney fees."

This statute applies broadly to all contract actions in Arizona, whether the contract is written or oral, express or implied. Arizona courts routinely award attorney fees in contract disputes, and this exposure is substantial. See Associated Indem. Corp. v. Warner, 143 Ariz. 567, 694 P.2d 1181 (1985).

Additionally, under A.R.S. § 12-341.01(B), if a written settlement offer is rejected and the judgment ultimately obtained is equal to or more favorable than the offer, the offeror is deemed the successful party from the date of the offer.

F. Total Demand Summary

V. STATUTE OF LIMITATIONS

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

☐ Written contracts (A.R.S. § 12-548): Six (6) years from the date the cause of action accrues.
☐ Oral contracts (A.R.S. § 12-543(1)): Three (3) years from the date the cause of action accrues.
☐ Sale of goods under UCC (A.R.S. § 47-2725): 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 Arizona law, the injured party has a duty to make reasonable efforts to mitigate damages, but this duty does not require extraordinary measures or unreasonable expense. See Contempo-Tempe Mobile Home Owners Ass'n v. Johnson, 132 Ariz. 8, 643 P.2d 1015 (App. 1982).

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:

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

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 [________________________________] County Superior Court (or the United States District Court for the District of Arizona, if federal jurisdiction exists) seeking a judgment for all compensatory, consequential, and incidental damages;
2. Seek prejudgment interest at 10% per annum under A.R.S. § 44-1201;
3. Recover attorney fees under A.R.S. § 12-341.01 - this exposure is substantial and increases with each day of litigation;
4. Pursue all post-judgment remedies available under Arizona law, including but not limited to:
   - Wage garnishment under A.R.S. § 12-1598 (the lesser of 10% of disposable earnings or disposable earnings exceeding 60 times federal minimum wage)
   - Bank account levy
   - Real and personal property liens
   - Sheriff's sale of non-exempt assets
5. Seek any and all other relief 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 under Arizona law, including adverse inference instructions and monetary penalties. Arizona courts have broad discretion to impose sanctions for destruction of evidence.

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: _______________________________
[________________________________]
State Bar of Arizona 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

• A.R.S. § 12-548 - Written contract limitation (six years)
• A.R.S. § 12-543(1) - Oral contract limitation (three years)
• A.R.S. § 47-2725 - UCC sale of goods limitation (four years)
• A.R.S. § 44-1201 - Legal interest rate (10% per annum)
• A.R.S. § 12-341.01 - Attorney fees in contract actions
• A.R.S. § 12-1598 - Wage garnishment provisions
• Ariz. Const. Art. 2, § 31 - No limitation on damages
• Graham v. Asbury, 112 Ariz. 184, 540 P.2d 656 (1975) - Elements of breach of contract
• Rawlings v. Apodaca, 151 Ariz. 149, 726 P.2d 565 (1986) - Implied covenant of good faith
• Zancanaro v. Cross, 85 Ariz. 394, 339 P.2d 746 (1959) - Material breach
• Associated Indem. Corp. v. Warner, 143 Ariz. 567, 694 P.2d 1181 (1985) - Attorney fees