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Failed promises under grant, breach of contract claimed

An executory contract can be a promise to accomplish some result or provide some product by a certain day in the future in return for a promised consideration. Under California law if a party breaches an executory contract and fails to substantially perform by the specified date, the other party may then claim a breach of contract. The non-breaching party may demand the return of funds paid, especially if it received no divisible value for those payments.

In a somewhat unusual arrangement, a county government outside of California is making a claim against a startup private health drink maker that in 2011 was the recipient of a $5 million "grant" from the county. The grant was in effect the awarding of a contract in which the company agreed to provide certain results within certain time periods. One part of the agreement was that the bottler would create 40 jobs in the county by Dec. 31, 2013. In total, the company was to provide 208 jobs within five years of the Feb. 2011 grant.

The company has failed to perform its promises, and has provided only a few jobs while already putting all of the funding into its startup efforts. The facility has become bogged down in disputes with bottling equipment manufacturers and others. It's currently not producing any product at all.

The county, located in Florida, recently gave the bottler 45 days to return $4.7 million or a breach of contract lawsuit would be filed. It's unknown whether the funding was part of a federal stimulus program filtered through the county. However, for purposes of this discussion it's presumed that the agreement is not federally influenced.

In California, a breach of contract action can be based on the failure of a party to substantially perform its obligations under the agreement. When it's clear that a substantial breach has occurred, the non-breaching party should make a written demand for return of the consideration paid. If the other party does not comply within a reasonable time, then legal action can be pursued quickly and aggressively.

Source: news-press.com, Lee County wants its $4.7 million back from VR Labs, Dick Hogan, Jan. 9, 2014

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