As a litigator, I always advise clients to put contracts in writing with their vendors, customers, contractors, subcontractors, partners, and suppliers. A written contract helps define the duties and responsibilities of the parties as well as payment terms and what can occur if a party breaches. A written contract may include provisions for the award of liquidated damages and attorney fees in addition to compensatory damages in the event of a breach. However, if you did not enter into a written contract and the other party breaches, what can you do?

There are various theories for recovery in the event that a written contract does not exist between the parties. Firstly, a party can certainly sue for breach of oral contract if the deal between the parties was spoken and closed with a handshake. To meet his burden in a breach of contract action, the plaintiff must establish an offer and acceptance, consideration, definite and certain terms of the contract, plaintiff's performance of all required contractual conditions, the defendant's breach of the terms of the contract, and damages resulting from the breach. ( Vandevier, 135 Ill.App.3d at 791, 90 Ill.Dec. at 561, 482 N.E.2d at 380; O'Neil & Santa Claus, Ltd. v. Xtra Value Imports, Inc. (1977), 51 Ill.App.3d 11, 14, 8 Ill.Dec. 78, 80, 365 N.E.2d 316, 318.) Clearly, the main issue in most of these cases is establishing that the parties understood the “definite and certain terms of the contract”. In a breach of oral contract, the battle become “he says, she says”, but typically there may be other paperwork to evidence the intent of the parties in the form of invoices, letters, emails, bills of lading etc. Moreover, witness testimony is paramount and the more key witnesses that can corroborate the Plaintiff’s understanding of the contract, the better.

The next few theories are known as quasi-contract theories. These would include implied contract, unjust enrichment and account stated. A contract implied in fact is an actual contract; the only difference between an express contract and a contract implied in fact is that in the former the parties arrive at their agreement by words, either written or oral, while in the latter their agreement is arrived at by a consideration of their acts and conduct. Barry Mogul & Associates, Inc. v. Terrestris Development Co., 267 Ill.App.3d 742, 750, 205 Ill.Dec. 294, 643 N.E.2d 245 (1994). A good example of an implied contract is a real estate broker did not have a contract but can shows that he was instrumental in bringing parties together and the transaction is consummated, he is regarded as the procuring cause of the sale and is entitled to his commission. The contract is implied in fact.

The elements of unjust enrichment are: (1) an enrichment, (2) an impoverishment, (3) a relation between the enrichment and impoverishment, (4) the absence of justification and (5) the absence of a remedy provided by law.” Jackson National Life Insurance Co. v. Kennedy, 741 A.2d 377, 393 (Del.Ch.1999). Or put another way, to recover under a claim for unjust enrichment, the plaintiff must allege that the defendant voluntarily accepted a benefit which would be inequitable for him to retain without payment. Aardema v. Fitch, 291 Ill.App.3d 917, 225 Ill.Dec. 893, 684 N.E.2d 884 (1997). Unjust enrichment is based on a contract implied in law, so it cannot be used where the parties have an express contract. However, a Plaintiff may plead a cause of action based on an express contract, and also plead, in the alternative, a cause of action based on unjust enrichment. The Plaintiff simply cannot, ultimately, recover under both theories.

An account stated has been defined as an agreement between parties who have had previous transactions that the account representing those transactions is true and that the balance stated is correct, together with a promise, express or implied, for the payment of such balance. ( LaGrange Metal Products v. Pettibone Mulliken Corporation (1982), 106 Ill.App.3d 1046, 1053, 62 Ill.Dec. 619, 436 N.E.2d 645; Motive Parts Company of America, Inc. v. Robinson (1977), 53 Ill.App.3d 935, 938, 11 Ill.Dec. 665, 369 N.E.2d 119.) The agreement must manifest the mutual assent of both the creditor and the debtor. ( Allied Wire Products, Inc. v. Marketing Techniques, Inc. (1981), 99 Ill.App.3d 29, 40, 54 Ill.Dec. 385, 424 N.E.2d 1288; Protestant Hospital Builders Club v. Goedde (1981), 98 Ill.App.3d 1028, 1032, 54 Ill.Dec. 399, 424 N.E.2d 1302.) The meeting of the minds upon the correctness of an account is usually the result of one party rendering a statement of account to which the other party acquiesces. (**520 ***543 LaGrange, 106 Ill.App.3d 1046, 1053, 62 Ill. Dec. 619, 436 N.E.2d 645; Motive, 53 Ill.App.3d 935, 938, 11 Ill.Dec. 665, 369 N.E.2d 119.) The form of acquiescence is immaterial and the meeting of the minds may be inferred from the conduct of the parties and the circumstances of the case. Where a statement of account is rendered by one party to another and is retained by the latter beyond a reasonable time without objection, this constitutes a recognition by the latter of the correctness of the account and establishes an account stated. LaGrange, 106 Ill.App.3d 1046, 1053, 62 Ill.Dec. 619, 436 N.E.2d 645; *268 Allied Wire, 99 Ill.App.3d 29, 54 Ill.Dec. 385, 424 N.E.2d 1288; Motive, 53 Ill.App.3d 935, 939, 11 Ill.Dec. 665, 369 N.E.2d 119. Therefore, it is important to send timely and accurate statements of balances due to your customers and also deal with any objections to the bill in a timely manner. Keep good records of all of your business accounts.

This article does not address all legal theories available such as promissory and equitable estoppels and others, but I hope it gives you a sense of some of the forms of recovery available to you if you are faced with a non-paying customer. Put it in writing first, and have all of your standard and commonly used contracts examined by an attorney at Lavelle so we can strengthen your position and provide safeguards for you in case of a breach. A few hundred dollars for a contract review up front may save you tens of thousands of dollars should that contact be the basis for a lawsuit. But also remember that all is not lost if the contract is not in writing.