Written by Karissa Lin, student intern under the supervision of Attorney Terance Orme

In the 1998 Disney animation Mulan, the female protagonist Fa Mulan disguises herself as a male soldier and joins the army in place of her elderly father, despite the military’s conscription specifically requiring one male from each family to enlist. As a matter of fact, her father states in the movie that if Mulan’s identity were to be discovered, the army would undoubtedly kill her. While the movie does not explicitly state why this is the case, one might say that Mulan’s decision to intentionally deceive the army and join with a false name and identity (Ping, supposedly a son of the Fa family) was the main reason she would be punishable by death; another might point out that the army only allowed men to serve, and that by joining, Mulan breached the conditions of the conscription. As the two reasons seem to go hand in hand, one may argue that both were valid reasons to explain Mulan’s misconduct and call for punishment by death. But how far do these justifications go in real-life scenarios?

Outside of the Disney world, there are two somewhat analogous causes of action: fraud and breach of contract. In California, the following essential elements must be proven by the plaintiff to recover damages from the defendant for breach of contract:

1. That [name of plaintiff] and [name of defendant] entered into a contract;
2. [That [name of plaintiff] did all, or substantially all, of the significant things that the contract required [him/her/nonbinary pronoun/it] to do;]

[or]

2. [That [name of plaintiff] was excused from having to [specify things that plaintiff did not do, e.g., obtain a guarantor on the contract];]

3. [That [specify occurrence of all conditions required by the contract for [name of defendant]’s performance, e.g., the property was rezoned for residential use];]

[or]

3. [That [specify condition(s) that did not occur] [was/were] [waived/excused];]

4. [That [name of defendant] failed to do something that the contract required [him/her/nonbinary pronoun/it] to do;]

[or]

4. [That [name of defendant] did something that the contract prohibited [him/her/nonbinary pronoun/it] from doing;]

5. That [name of plaintiff] was harmed; and
6.  That [name of defendant]’s breach of contract was a substantial factor in causing [name of plaintiff]’s harm. (CACI No. 303)

There are often “commonly associated” causes of actions that can be brought forth alongside breach of contract — for instance, breach of implied covenant of good faith and fair dealing, which is the violation of an implied promise to be faithful to one’s duty or obligation (CACI No. 325). While a breach of contract refers to a failure to meet obligations of a written or oral contract, “[a] ‘breach of the implied covenant of good faith and fair dealing involves something beyond breach of the contractual duty itself’ and it has been held that ‘[b]ad faith implies unfair dealing rather than mistaken judgment….” (See Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1394.) It is also important to note that while breach of the implied covenant of good faith and fair dealing is  commonly associated with breach of contract, “[i]f the allegations do not go beyond the statement of a mere contract breach and, relying on the same alleged acts, simply seek the same damages or other relief already claimed in a companion contract cause of action, they may be disregarded as superfluous as no additional claim is actually stated.” (Id. at 1395.) .

Another common cause of action that may be proven alongside a breach of contract is unjust enrichment, in which restitution can be rewarded through meeting the elements “receipt of a benefit and unjust retention of the benefit at the expense of another” (CACI No. 375). “In general, a person who has been unjustly enriched at the expense of another is required to make restitution to the other.” (Rest., Restitution, § 1; See also CTC Real Estate Services v. Lepe (2006) 140 Cal.App.4th 856.)

“Ordinarily the benefit to the one and the loss to the other are co-extensive, and the result . . . is to compel the one to surrender the benefit which he has received and thereby to make restitution to the other for the loss which he has suffered. In other situations, a benefit has been received by the defendant but the plaintiff has not suffered a corresponding loss or, in some cases, any loss, but nevertheless the enrichment of the defendant would be unjust. In such cases, the defendant may be under a duty to give to the plaintiff the amount by which he has been enriched.” (Unilogic, Inc. v. Burroughs Corp. (1992) 10 Cal.App.4th 612, 627–628.)

Unjust enrichment differs from breach of contract in that there is an emphasis on the retention of an unearned benefit in addition to an initial breach or act that led to an unfair receipt of a benefit. “[U]njust enrichment, as the phrase is used here, is, in effect, synonymous with restitution. ‘ “ ‘The phrase “unjust enrichment” is used in law to characterize the result or effect of a failure to make restitution of or for property or benefits received under such circumstances as to give rise to a legal or equitable obligation to account therefor.” (Ajaxo Inc. v. E*Trade Financial Corp. (2010) 187 Cal.App.4th 1295, 1305.)

In cases where breach of contract allegations are raised against a business, then breach of the law against unfair competition, which includes “any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising,” may also be raised as a commonly associated cause of action with breach of contract. (Cal. B&P § 17200.)

            Fraud, also referred to as fraudulent misrepresentation, in a contract differs from a mere breach of contract because it involves one party making a false representation to intentionally and reasonably deceive the opposing party. To establish the claim that a false representation harmed the plaintiff, the plaintiff must prove the following elements:

1. That [name of defendant] represented to [name of plaintiff] that a fact was true;
2. That [name of defendant]’s representation was false;
3. That [name of defendant] knew that the representation was false when [he/she/nonbinary pronoun] made it, or that [he/she/nonbinary pronoun] made the representation recklessly and without regard for its truth;
4. That [name of defendant] intended that [name of plaintiff] rely on the representation;
5. That [name of plaintiff] reasonably relied on [name of defendant]’s representation
6. That [name of plaintiff] was harmed; and
7. That [name of plaintiff]’s reliance on [name of defendant]’s representation was a substantial factor in causing [his/her/nonbinary pronoun/its] harm. (CACI No. 1900.)

It is important to point out that in addition to receiving compensation for the losses incurred by fraudulent misrepresentation, plaintiffs who sue for fraud can also seek compensation for punitive damages such as pain and suffering (Cal. Civ. § 3294). On the other hand, “[c]onsequential damages beyond the expectations of the parties” such as mental anguish and emotional distress that resulted from a breach of contract are not compensable (Applied Equip. Corp. v. Litton Saudi Arabia Ltd.). Compensation for breach of contract is usually limited to the losses that would have been reasonably foreseen as a result of the breach (Cal. Civ. § 3300.)

Punitive damages, including pain and suffering, also cannot be recovered for commonly associated causes of action to breach of contract (Cal. Civ. § 3294). “California law does not authorize the award of general or punitive damages for the mere breach of a commercial contract. The measure of damages for breach of contract is limited to those losses which might reasonably be foreseen by the parties. (See Ericson v. Playgirl, Inc. (1977) 73 Cal.App.3d 850, 854 [140 Cal.Rptr. 921, 96 A.L.R.3d 427]; Mendoyoma, Inc. v. County of Mendocino (1970) 8 Cal.App.3d 873, 879-880 [87 Cal.Rptr. 740]; Civ. Code, § 3300.) Thus, damages for pain and suffering or medical expenses are ordinarily not available for breach of a commercial contract.

“A similar rule applies to punitive damages. Civil Code section 3294, subdivision (a), specifically provides that exemplary damages are only available [i]n an action for the breach of an obligation not arising from contract, … (Italics added.) Hence, punitive damages are never recoverable for breach of contract, no matter how wilful or malicious, except where the wrongful act is also a tort. [Citations.]  (1 Witkin, Summary of Cal. Law (8th ed. 1973) Contracts, § 644, p. 548.) As a matter of law, plaintiffs should not have been awarded general or punitive damages on their first cause of action for breach of contract.” (Internal quotations omitted.) (Quigley v. Pet, Inc., 162 Cal.App.3d 877, 887 [208 Cal.Rptr. 394] (1984).)

However, punitive damages may be recoverable if awarded based on a different cause of action — such as one of tort law. Such a concept is effectively illustrated in the case of Quigley v. Pet (1984) 162 Cal.App.3d 877 [208 Cal.Rptr. 394] (“Quigley”). In Quigley, punitive damages could not be awarded under breach of contract and were, instead, based on a tortious breach of the implied covenant of good faith and fair dealing. Whether or not breach of the covenant of good faith and fair dealing is tortious often depends on the specific facts of a case, and is not one size-fits-all.

The court states “[a]lthough it is clear, in California, the law implies in every contract a covenant of good faith and fair dealing, it is not so clear “that breach of the covenant always gives rise to an action in tort ….” (Internal quotations omitted.) (Id., at 889, quoting Seaman’s Direct Buying Service, Inc. v. Standard Oil Co. (1982) 36 Cal.3d 752, 768.) Thus, breaching the covenant of good faith and fair dealing can be a tort. It merely depends on the factual conduct of the party involved. “[A] party to a contract may incur tort remedies when, in addition to breaching the contract, it seeks to shield itself from liability by denying, in bad faith and without probable cause, that the contract exists.” (Quigley, supra 162 Cal.App.3d. at 890; Seaman’s Direct Buying Service, Inc. v. Standard Oil Co. (1982) 36 Cal.3d 752, 769.) It appears plaintiff’s attorneys in Quigley successfully established to the jury that there was sufficient independent tortious conduct to warrant the imposition of tort remedies for conduct that arose from contractual relationship.

In a hypothetical scenario where two parties enter into a contract and one side (defendant) does not pay the other (plaintiff), the plaintiff may argue that the contract has been breached due to the missing payment, which has subsequently led to damages. Alternatively, the Plaintiff may claim that a fraudulent representation was made because the opposing party did not have any intention to pay when signing the contract. It is also possible to allege both causes of action, in addition to commonly associated causes of action, seeking maximum compensation for punitive damages. Whether any of these choices is best again largely depends on the facts of the case.

            Consider for example the cases Erlich v. Menezes (1999) 21 Cal.4th 543 [87 Cal.Rptr.2d 886; 981 P.2d 978] (“Erlich”) and Quigley as good guiding posts for this inquiry. In Erlich , causes of action alleged by the plaintiff included breach of contract, fraud, negligent representation, and negligent construction (Erlich, supra, at 549.). Though the court did not find the defendant guilty of fraud, misrepresentation, or acting intentionally, the case illustrates the strategic value in alleging all properly asserted causes of action, namely for fraud and deceit if there is independent evidence of intentionally misleading or deceitful claims. “[T]he duty that gives rise to tort liability is either completely independent of the contract or arises from conduct which is both intentional and intended to harm.” (Erlich, supra, at 552.).

Additionally, Quigley demonstrates the efficiency of including breach of the covenant good faith and fair dealing, as a commonly associated cause of action to breach of contract, with a strategic note of focusing the breach of the covenant good faith and fair dealing as a tortious breach. Through this method of including all applicable causes of action and, strategically focusing such causes of action to avail damages that may not be available through breach of contract, the plaintiff can also receive compensation for punitive damages under the tortious breach, such as pain and suffering and medical costs that resulted from the damages (Quigley, supra, at 887.).