If you are the owner of a large business, you have likely had to deal with legal claims on occasion. One common claim is breach of contract. If your company is being accused of breach of contract, there are some defense tactics you should know about.
What is breach of contract?
A breach of contract occurs when one party to the contract fails to perform their duties per the agreement. This includes failing to meet industry standards or failure to fulfill express or implied warranties. A breach of contract can be material (significant) or minor. To bring a legal claim, the nonbreaching party must have suffered some sort of damages due to the breach.
Defenses to breach of contract
Defending against a breach of contract claim is not always easy, but there are are several available defense strategies. Options to present include arguing that:
- Performing contractual obligations has become impossible
- The purpose of the contract is no longer feasible
- The contract itself is illegal
- Enforcing the contract would violate public policy
Another type of defense strategy involves showing that the contract itself was never valid to begin with. For example, a contract requires an exchange of consideration. If this element is missing, it could provide a defense to a breach of contract claim.
Likewise, fraudulent contracts cannot be enforced. If the contract contains a mutual mistake — as when both parties were misinformed about the substance of the contract — this can also provide a defense against breach of contract. Even unilateral mistakes, if the nonbreaching party knew of them, could provide a defense against breach of contract. If each party accepts what was performed as adequate, even if it does not exactly match what was agreed upon, this can also provide a defense to breach of contract. Finally, lack of capacity — for instance, when one party to the contract was incapacitated — is a defense against a breach of contract claim.
Know your rights
Breach of contract claims can present a serious problem to owners of California businesses. By learning more about your legal options, you can make decisions that are in the best interests of your business.