Legal Question in Business Law in California

Re: 1 side breaches a contract if the other also breaches then what ?

Party A is not in breach. He was demanding more, but you are not required to give it to him. You should just continue making payments. If he attempts to hurt your credit, then you would have a cause of action.

Re: 1 side breaches a contract if the other also breaches then what ?

You should also note that 20% interest is usurious (violating the usury law) in California, so if party A tries to sue you, he likely will not be able to get any more than the original $1,000.00. In fact, 10% per month is likely too high.

Take Mr. Koenen's advice and just continue paying what you agreed to pay. If your credit is damaged you then have claims under multiple state and federal laws.

Re: 1 side breaches a contract if the other also breaches then what ?

Are they a financial institution? First of all, private parties generally can't charge excessive interest -- it is usury and illegal. Futher, it looks like breach of contract, cohersion, black mail, etc. You should tell them to take flying leap and send a copy of their correspondence along with the original contract to the credit agencies to clear your credit if they do try to attack it as threatened. You may retain me if you think it is necessary.

Re: 1 side breaches a contract if the other also breaches then what ?

You say to assume it's a material breach -- but it isn't. Party A has fully performed under the simple agreement you describe when he advances you the full $1,000. Having fully performed, his breach is a legal impossibility.

What A has done, rather, is commit the crime of extortion or attempted extortion. In California, by statute, if the demand were put in writing, the crime is complete when the written demand is given to you, whether you submit or not. Otherwise, I think it is only attempted extortion until you submit to the demand.

Returning to breach of contract. When the breach amounts to failure of a "condition precedent," further performance by the non-breaching party is excused. A condition precedent is an act, circumstance, etc. that, under the express or implied terms of the contract, must occur first and triggers a party's duty to perform. In your example, the disbursement of $1,000 in loan proceeds to you is a condition precedent to your duty to make monthly payments to the lender. In your case, the lender has fully performed the contract and cannot breach.

Sure, one might argue that there is a further implied covenant to accept the payments gracefully and not make further demands, but I don't think courts would go that route when there are better legal theories (extortion) available.