What Defenses Might A Business Use Against Breach Of Contract Claims?

When faced with breach of contract claims, a business may assert various defenses to contest the allegations. Here are some common defenses:

Common Defenses Against Breach of Contract Claims

1. Lack of Contract Formation:
   • No Valid Contract: The business may argue that a valid contract was never formed due to lack of offer, acceptance, or consideration.
   • Defective Contract: The business might claim that the contract is void or voidable due to factors like fraud, misrepresentation, or duress.
2. Performance Was Impossible:
   • Impossibility of Performance: If unforeseen circumstances make it impossible to fulfill the contract (e.g., natural disasters, changes in law), the business may argue that they cannot be held liable for non-performance.
3. Material Breach by the Other Party:
   • Counterclaims: The business could assert that the other party committed a material breach of the contract first, which excuses their own performance.
   • Failure to Mitigate: They may argue that the claimant did not take reasonable steps to mitigate their damages following the breach.
4. Waiver or Estoppel:
   • Waiver: If the other party has previously accepted late performance or non-conformance without objection, the business might claim that the right to enforce strict compliance has been waived.
   • Equitable Estoppel: This defense asserts that the claimant cannot enforce the contract because their actions led the business to reasonably rely on a different set of circumstances.
5. Contractual Limitations:
   • Limitation of Liability Clause: The contract may include clauses that limit liability for certain types of damages or set caps on recoverable amounts.
   • Exculpatory Clauses: The business may argue that certain breaches are not actionable due to explicit terms in the contract that release them from liability.
6. Statute of Limitations:
   • Timeliness: The business may claim that the breach occurred outside the statute of limitations for filing a breach of contract claim, thus barring the claim.

Impact of Defenses

The effectiveness of these defenses can vary based on the specific circumstances of the case, the terms of the contract, and applicable laws. A successful defense can lead to the dismissal of the claim, reduced liability, or negotiated settlements.

Example

If a contractor is sued for failing to complete a project on time, they might defend themselves by:

• Arguing that the homeowner failed to provide necessary information, thus breaching the contract first.
• Presenting evidence that a natural disaster made timely completion impossible.
• Pointing out that the homeowner had previously accepted late submissions without complaint, thereby waiving their right to enforce strict deadlines.

By employing these defenses, the business can potentially mitigate or eliminate liability for breach of contract claims.