Chances are high that anyone who owns or runs a business will at some point in time find that they need to enter into some sort of contractual relationship with another entity. While this is a normal state of affairs in the business world, the sad reality of this is that with contractual relationships comes the possibility and challenge of a breach of contract.
While there are different types and consequences of a breach of contract, the one common denominator among all of them is the fact that a breach can often have negative consequences for the affected or ‘injured’ party.
Whenever a party to a contract breaches one or more of its terms, you can almost always be certain that they will have an “excuse” or a reason for this. This is generally referred to, especially in legal terms, as a “breach of contract defense.”
There are some situations whereby no type of contract defense can hold up in a court of law as a good enough reason for breaching the terms of a contract. There are, however, certain types of defense that no matter the type of injury or loss suffered by the non-breaching party, a court of competent authority will have no choice but to vacate the contract and nullify all its terms, and the liability thereof, of the breaching party. Collectively, these defenses are often known as affirmative defenses.
5 Common Defenses to a Contract Breach Are:
- Does the Statute of Frauds Require the Contract Be in Writing?
While most contracts are enforced by courts even if they were not put into writing, the courts will recognize the Statute of Frauds as a defense in certain situations. A Statute of Frauds refers to a requirement that specific types of contracts must be in writing.
The Statute of Frauds applies when…
- There is a marriage contract.
- There is a contract to sell land.
- There is a contract for the sale of goods that is equal to or more than $500.
- There is a promise to pay or answer for the debt of another.
- There is a contract which will take more than one year to perform.
In these situations, there needs to be some form of writing to show that a contract exists. While there is a writing requirement, there does not necessarily need to be a signature. As such, it is important to consult with a lawyer to see if such a defense will stand in your particular case.
- Is there Evidence of Contractual Incapacity?
Another defense in a breach of contract dispute involves one or both parties lacking the capacity to enter into that contract in the first place.
There are two situations in which this serves as an affirmative defense:
- There is a minor.
- There is someone with a mental incapacity.
A party who can prove they fall under one of these situations may be able to raise an affirmative defense based on the lack of contractual capacity.
Your business lawyer will be able to help you assess if this defense applies to your particular case, and if a party can justify enforcement of the contract against the other party under such circumstances. While someone with a mental incapacity can disaffirm a contract, they are also able to ratify a contract when they do possess the necessary capacity for contract formation.
- Was there a Misunderstanding or Mistake?
There are times when a party can employ the defense of misunderstanding or mistake in a contract dispute case.
In the instance of a misunderstanding, the court will consider whether one or both parties were aware of the ambiguity to either void the contract or enforce the contract pursuant to the aggrieved parties intentions. It is important to discuss the facts of your case with your attorney to prepare for such a defense or to protect yourself as the plaintiff.
If there was a mistake, the court will look at whether the mistake occurred on the part of both or just one of the parties before voiding the contract or enforcing it.
If a defense based on misunderstanding or mistake can be sufficiently raised in your case, you want to first discuss this with your lawyer to determine what your options are regarding the possibility of a contract breach being enforced.
- Was there duress or undue influence?
There are situations in which one party can raise the defense of duress or undue influence to excuse their nonperformance in a breach of contract claim. Because both parties must enter into the contract voluntarily for it to be enforceable, the court will determine the contract was invalid if a party can prove that they fall under one of the following situations.
- They experienced duress in being wrongfully threatened such as through force.
- They were coerced or put under an inappropriate amount of pressure in which they were vulnerable to.
In these two situations, a party can raise an aggressive defense in a contract dispute.
- Was there Misrepresentation or Fraud?
When a contract has been formed based on fraud or misrepresentation, the other party may be able to protect themselves in a breach of contract claim. It is important to understand the nuances between misrepresentations and non-disclosures situations. First, you will want to determine if a party fraudulently, or even inadvertently, represented facts. Second, you can also consider if the party fraudulently failed to disclose facts that were essential to contract formation. Either situation is grounds enough to use as a defense to a contract breach.
While we have only listed 5 such defenses, there are many more such defenses that can be used by an individual or company, such as the indefinite nature of the contract, the illegality of the contract, the principle of estoppel, the unconscionability of the contract and more.
Whether you are the plaintiff or defendant in a breach of contract case, knowledge of these defenses can prove to be useful and can work in yours. However, given that it is often the defendant that is more likely to always use these defenses, it is, therefore, safe to say that knowledge of these defenses favors them more.
You will also want to keep in mind that the burden to prove an affirmative defense falls on the defendant who wants to protect them self in the dispute. As a defendant, you will want to work with your attorney to make sure that you can successfully use one of these defenses to state your case in court.