Breach of Contract Defense
If you or your company are facing a lawsuit or dispute for a breach of contract, it is important to know some of the defenses your lawyers can raise in defending this type of civil litigation case. There are often situations where the defendant in a breach of contract lawsuit can claim in the lawsuit answer that their performance of the contract obligations was excused under the law due to the wrongful conduct of the other party to the contract. Some of the most common affirmative defenses to a breach of contract claim or lawsuit include:
- Termination of a Contract for Cause. Often, the actual contract terms provide for one party to unilaterally terminate a contract and cease performance due to circumstances which usually include misconduct by the other party. The explicit language of the contract will spell out exactly what constitutes “cause” and the steps one must take to formally terminate the agreement and stop performing. If the actions do not amount to cause or if the proper procedural steps are not taken, the terminating party may actually be subject to a lawsuit for breach of contract.
- Prior Material Breach. A common defense to a breach of contract lawsuit is that the contract was actually breached by the plaintiff before the defendant stopped performance. That is, if one party to a contract commits a “material breach” of the contract terms, the other party is excused of their duties under the agreement. In order for a breach of contract to be considered “material” under the law, it must be so significant that it deprives the other party of the benefits that could have been reasonably anticipated from full performance under the contract. If the breach of contract is not material, there is no excuse for the other party to cease performance and such would likely result in a breach of contract lawsuit for damages and attorneys’ fees.
- Repudiation. If one party to a contract unjustifiably absolutely and unconditionally refuses to perform a contract, this amounts to repudiation and the other party is free to terminate the contract and they are excused of their contractual obligations.
- Duress. While not that common of a breach of contract defense, duress can be the basis to refuse to abide by the terms of a contract. Duress occurs when one is forced to enter into a contract threats or actions which destroys their ability to freely refuse. Duress does not have to include threats of force – only threats to do something which the aggressor has no legal right to do.
- Equitable Estoppel. When the enforcement of a contract would lead to an unjust result, the defendant to a breach of contract lawsuit can claim the defense of equitable estoppel. For example, if two parties enter into a contract to sell a house for full value and the seller does not disclose that he only owns a 10% interest in the property, the buyer could cancel the contract. If the seller then sues for breach of contract, the buyer could claim the defense of equitable estoppel claiming it would be unjust to enforce a contact which was procured through misrepresentation or concealment of the ownership.
- Defense of Fraud. A defendant in a breach of contract lawsuit can claim fraud as a defense if it can be shown that the plaintiff induced him into entering the contract through false representations which were both material and relied upon by the defendant. As an example, if the seller of a home conceals the fact that the foundation is damaged and does not disclose this to the buyer, the buyer could cancel the contract. If the seller sues the buyer for breach of the real estate contract, the defendant could claim fraud in the inducement of the contract and therefore it is unenforceable.
- Statute of Frauds Defense. Many contracts can be oral contracts with nothing written and are just as enforceable as lengthy agreements. However, the law requires that some contracts must be in writing. Some of these include contracts to sell real estate, contracts that cannot be performed within one year and contracts for certain loans. If you are being sued for breach of an oral contract that should have been in writing, enforcement of it is barred by the statute of frauds. For example, if two parties verbally agree to the terms of the sale of a home and one later backs out, the oral contract for sale is not enforceable – no matter how detailed the agreement may have been.
- Statute of Limitations Defense to Breach of Contract. Generally, in Texas the statute of limitations for enforcement of a contract is 4 years from the breach. So, if a party stops making payments under a loan or other agreement and the other party waits over 4 years to file a lawsuit, the defendant could assert the statute of limitations as a defense.
These are just a few of the legal defenses available when somebody is sued for breach of a contract. There are many more available. If you are being sued for breach of contract, contact Michael P. Fleming today for a free consultation or reach us through our online system.