How To Defend Against Breach of Contract Claims

Generally, the terms of a contract are legally binding, such that parties who fail to perform are in breach of contract. However, there are a number of ways that a contract can be invalidated or rescinded. If you’re sued or threatened with a breach of contract lawsuit, you can raise several potential defenses. 

This article will explain what a breach of contract is and cover some of the most common defenses to breach of contract. It’s best to raise as many defenses as possible.

Once you’re aware of the potential defenses, it’s a good idea to speak with an experienced contracts lawyer for legal advice about your situation. 

What Is a Breach of Contract? 

“Breach of contract can go down in any number of ways,” says New York business attorney Sarah Gold. “In general, one party doesn’t do what they promised or were supposed to do in the performance of the contract.”

A contract can be about anything, from buying real estate to hiring someone to watch your pet. A valid contract obligates two or more parties to perform (or not perform) certain actions. If one of the parties fails to perform their contractual obligations, they have breached the contract. Breaches typically involve not performing at all, not following certain terms of the contract, or not performing in the agreed-upon timeframe. 

“Sometimes, there can be a breach before the contract even gets going,” adds Gold. “For example, if the agreement is a time-sensitive thing and it’s supposed to happen like six weeks from now, but in week four, the party’s warehouse burns down, then technically you have what’s called an anticipatory breach, meaning the contract is going to go bad, but we haven’t hit the deadline yet.” 

Another type of breach is “mutual rescission, meaning that both parties have decided they don’t want to go through with the contract anymore. This is effectively a breach of contract, but both parties agree to disagree and walk away,” says Gold. 

Material and Immaterial Breaches of Contract 

Some breaches of contract are more severe than others.

Material breaches are so significant that they completely ruin the contract. For example, say two parties agreed to a real estate transaction. The parties complete the contract and other legal documents and the buyer pays the seller. Then the seller backs out. The seller’s refusal to sell is a material breach. It undercuts the entire point of the contract and leaves the buyer in a terrible position. 

Immaterial breaches are relatively minor. They are delays, inconveniences, or small deviations from the contract terms that can be fixed, saving the contractual agreement.

For example, say you order a pair of expensive sunglasses for your spouse’s birthday. You are guaranteed the sunglasses two days before the date. However, the sunglasses don’t arrive until three days after the birthday. While the delay is an inconvenience, it doesn’t ultimately deprive you or your spouse of the enjoyment of the sunglasses.  

How do you know if a breach is material or immaterial? There is no hard and fast rule to determine this, and courts look at many factors. If a party can fix the breach, it was probably immaterial. 

Damages for Breach of Contract 

Different remedies are available for a breach of contract, including:

• Monetary damages
• Cancellation, when the non-breaching party legally backs out of the contract 
• Specific performance, that is, getting a court to order the breaching party to do what they originally promised

If you’re involved in a contract dispute over a breach, it’s a good idea to speak with a lawyer as soon as possible.

Breach of Contract Defenses 

The party accused of the breach can raise various defenses. “Take the case of a widget or something that has actually been shipped but was never delivered,” says Gold. “Depending on what the terms of the contract say, the defense might be: You didn’t insure it. Therefore, the minute it left our warehouse, that was on you. So, the fact that you never got it — not our problem.” 

Another defense is to say you couldn’t do what the contract says due to reasons outside your control. “During the COVID-19 pandemic, for instance, certain things couldn’t occur due to the public health crisis and government regulation,” says Gold. Parties may also invoke an “act of god” or natural disaster, such as a hurricane, that prevented them performing their part of the contractual agreement.

Sometimes, it turns out that it’s going to be very expensive for the company to uphold its side of the bargain. This is called commercial impossibility. “Usually, you can’t get out of a contract for that. You can try, but it’s kind of on the person who agreed to it — you should have foreseen the expenses involved. So, while it does come up as a possible defense to breach of contract, it usually doesn’t work.” 

Affirmative Defenses to Breach of Contract Claims

Several other affirmative defenses exist to a breach-of-contract claim. Many of these defenses argue, in essence, that the contract was invalid in the first place or that the party had a good reason not to perform. Common defenses include: 

Legal Incapacity

A party may argue that it lacked the legal capacity to enter a contractual agreement in the first place.

Individuals considered to lack capacity include minors (under 18 years of age), individuals with mental disabilities, or while under the influence.  

Statute of Limitations

Every state has statutes of limitations, which are laws that set deadlines for bringing a lawsuit. If the person who wants to sue misses the legal deadline, they cannot file the lawsuit.

In some cases, the party accused of breaching a contract can point out that the deadline for a lawsuit has passed. 

Statute of Frauds

Not every contract must be in writing. But some must. A statute of frauds is a law that says what types of contracts must be in writing. For example, contracts for real estate, items over $500, or those that take more than a year to complete must be in writing and signed by the party to be charged.

If these contracts aren’t in writing, they’re invalid. If you have breached an oral contract that should have been in writing, you can argue the contract was invalid in the first place because it violated the statute of frauds. 

Mutual Mistake

This occurs when both parties are mistaken about the contract’s essential terms. When this happens, the party accused of a breach can point to this mutual mistake as their reason for backing out of the contract.  

Lack of Consideration

Every contract must involve exchanging something of value for something else of value. The thing of value is “consideration.” If there was no consideration, there was no valid contract.

Instead, you might have had a gift, where one party simply gives something of value to someone else while receiving nothing in exchange. 

Impossibility, Impracticability, or Frustration of Purpose

In general, these defenses allege the breaching party could not perform their contractual obligations because of factors beyond their control.

They would have performed but couldn’t because circumstances made it impossible or impracticable to do so. Proving this will be highly fact-sensitive.  

Estoppel

Say a party agrees to a month-long delay in the delivery of products. The other party acts in good faith based on this statement. The first party can’t reverse course later and claim the delay was a breach.

The party accused of a breach can point to the first party’s earlier statements accepting the delay and argue they are “stopped” from making a breach of contract claim. 

Duress

The breaching party can argue they were coerced and had no free will in the formation of the contract. A contract negotiated under duress is invalid. 

Fraudulent Inducement

If a contract was based on misrepresentation, coercion, or undue influence, it’s invalid. 

Illegality

As a matter of public policy, contracts for illegal goods or services are invalid. For example, any contract for the exchange of illegal drugs, harming others, or breaking any law is not enforceable.

If the contract is for something illegal, it’s unenforceable. The breaching party could argue that the contract was illegal. 

Unconscionability

If a contract involves unfair bargaining power between the contracting parties or other unfair practices, it may be unconscionable and invalid. 

Finding a Contract Litigation Attorney 

If you are facing contract litigation, speak with an attorney about your case and potential defenses. Many lawyers provide free consultations for potential clients. These meetings let you get legal advice and decide if the attorney or law firm meets your needs. 

Visit the Super Lawyers directory to find a reputable and experienced attorney for help defending a breach of contract claim.