Amicas v. GMG Discusses Breach of Contract Law in Chicago

Contract law can be one of the most complex areas of the law. If you are involved in a Chicago contract dispute, it is important to know what type of relief you may be entitled to. Our experienced Chicago business attorneys focus on business law so that we can effectively represent your rights.

Contract negotiation and enforcement is critical to business growth. A recent First Circuit case discusses the law surrounding a breach of contract case. Amicas, Inc. v. GMG Health Systems, LTD, No. 11-1628 (1st Cir. Apr. 10, 2012). Amicas is a information technology (IT) company that developed software used in the medical field. This company is well-known and traded publicly. Gonzaba Medical Group (GMG) is a medical service company with hundreds of employees.

GMG needed computer software developed in order to handle the billing for its radiology services. GMG contracted Amicas and began negotiating the terms of a potential contract. GMG would pay Amicas for the development and license of two computer programs. Amicas' legal department drafted the contract that provided that GMG would pay over $1 million over five years for the development and software license for the two radiology computer programs.

The contract also contained a warranty on the part of Amicas to produce software that would conform to the concepts in the product manual. However, Amicas did add that they would not provide a warranty to assure that the software necessarily met all of GMG's requirements.

In order to create a binding contract, there are specific factors a court looks to. There must be a clear offer made, the offer must have been accepted, and there must be sufficient consideration to enforce the terms of the contract. In this case, Amicas offered to develop the software, GMG accepted the offer and the payments were consistent with the cost of the software development and licensing.

The contract was properly signed by both parties on the same date. Thus, this contract is considered to have been validly executed. Within the terms of the contract there was an integration clause. An integration clause verifies that the contract is the final and complete agreement between the parties. All previous communications, contracts or negotiations are considered void if they conflict with the terms of the final contract.

GMG was unhappy with the way the software integrated with their systems. Amicas continued to work on the software and provide program support to GMG. Without consulting with Amicas, GMG entertained negotiations with a competitor of GMG to discuss the creation of software to substitute that which was already developed. GMG then sent a notice of termination to Amicas claiming that their contract was cancelled because Amicas had failed to conform to the guidelines of the project because the software was not functional.

After trying to negotiate with GMG, Amicas found out that GMG had entered into a contract with Amicas' competitor. Thus, Amicas filed suit arguing that GMG had breached its contract. GMG counter-sued claiming that Amicas had breached the contract when it failed to produce a functional product.

The court stated that in order for a court to find that a party breached a contract, the plaintiff must prove that an actual contract existed, the plaintiff had been willing to comply with the terms of the contract, and that the defendant had breached the contract. Additionally, plaintiff must prove that the damages sought were causally related to the defendant's breach of contract.

GMG did not provide the court with any material evidence to support its contention that Amicas breached first; thus, the court found in favor of Amicas.

Jeremy A. Gibson & Associates is a law firm dedicated to business litigation in Chicago and elsewhere in Illinois. Call 877-452-4529 for a free consultation.