Defenses to a Breach of Contract Claim
If you're sued for breach of contract, raise all applicable affirmative defenses.
In a contract dispute over a breach of contract, you should raise as many legal defenses as possible, including "affirmative defenses." It's usually not enough to simply deny legal wrongdoing; you must respond with every plausible argument that justifies your position. And, if you don't raise defenses in the early stages of a breach of contract lawsuit, you may be prevented from raising them later. This article explains how affirmative defenses work and looks at the kinds of legal defenses that might be used in response to a breach of contract claim. (To learn more about what makes an agreement irreparably broken in the eyes of the law, check out Nolo's article Breach of Contract: Material Breach.)
What Is an Affirmative Defense to a Breach of Contract Claim?
Most defenses to a breach of contract claim are referred to as "affirmative defenses." As a legal matter, this means that the party raising the defense (the person sued for breach of contract) has the burden of proving the defense, if the dispute goes to trial.
An affirmative defense does not contest the primary claims or facts (for example, that there was a breach of contract), but instead asserts mitigating facts or circumstances that render the breach claim moot. In other words, it is like saying, "Even if I breached the contract, the other party should not win the lawsuit." For example, let's say that Dodd, a teenage singer, fails to show up for a concert and is accused of breaching his contract to provide entertainment services. Regardless of whether he breached the agreement, Dodd may assert the affirmative defense that he lacked the capacity to enter into the contract in the first place because he's a minor. (Learn more about what this means in Nolo's article Who Lacks the Capacity to Contract?)
Common Affirmative Defenses to a Breach of Contract Claim
How you frame your legal defenses in a breach of contract lawsuit is limited only by your lawyer's imagination (and your ability to bankroll legal fees). Some of the most common defenses are listed below.
- The contract was supposed to be in writing. If the other side argues that an oral agreement should be enforced against you, you may be able to defend yourself by claiming that a state law (known as the "statute of frauds") requires the type of contract -- for example, for the sale of real property -- to be in writing.
- The contract is indefinite. If the essential terms were never agreed upon, you may be able to defend by arguing that the contract is indefinite. This means either the parties did not consider the deal to be final or that a court could not discern the essentials, even by implication (for example, if it's not clear how long an agreement should last or what the specifications are for a construction project). Agreements to agree (such as letters of intent or agreements in principle) are usually considered indefinite and therefore unenforceable, although courts will require the parties to act in good faith to reach an agreement.
- There is a mistake. You can defend yourself by proving that a mutual mistake was made as to an essential fact in the contract -- for example, both parties were mistaken as to the authenticity of a painting. You cannot use this defense when referring to a mistake in judgment by one party ("Oops, I could have gotten so much more for my painting!")
- You lacked capacity to contract. If you lacked capacity (that is, you couldn't understand what you were doing when you entered into the deal, as discussed in the example above), the contract may be voidable. This defense is most likely to succeed in the case of minors and those with mental incapacities.
- You were fraudulently induced to enter into a contract. A contract will be invalid if it was induced by lies, under duress ("Sign this or we'll take your cat"), or by a trusted person's undue influence (your real estate agent advises you to buy because she secretly gets a kickback from the seller).
- The contract is unconscionable. A contract won't be enforced if it is grossly unfair. This almost always occurs in situations where the bargaining power is severely imbalanced (as in a contract of adhesion) and the party with more power takes advantage by forcing unfair conditions, clauses, or waivers on the other party.
- estoppel. When one party makes a statement excusing performance of the agreement and the other party relies on that statement, the first party may be prevented from later denying that statement and claiming a breach. For example, if a bank president calls a homeowner and tells her that the bank won't foreclose for six months in order to give the homeowner a chance to sell the home, the bank will be held to its six-month promise.
- The contract is illegal. A contract is unenforceable if its object or the thing bargained for is illegal -- for example, a contract that enables prostitution, violates tax laws, or requires the destruction of records. Contracts that may indirectly aid illegal purposes will sometimes be enforced -- for example, an agreement to supply gambling machines, even though they may be illegal in some states, may be enforced. Sometimes, a court will sever the illegal aspect from the agreement, leaving the rest of the contract enforceable.
The Catch-All Defense: Arguing in the Alternative
If you've been sued for breach of contract, the law permits you to claim as many alternative defenses as you want, even if they contradict each other. For example, you may argue that the contract is invalid or unenforceable, that you performed as required by the contract, and alternatively, that your failure to perform was justified by the other party's actions -- even though those arguments can't all be true. (It's a little bit like the criminal defense attorney who argues his client was 100 miles from the scene of the murder and, alternatively, that the murder was in self-defense.) Finally, in some cases, you may admit to the breach and assert defenses only to the damages claimed by the other side.
For more information on contract disputes, and an A to Z guide to everything you need to know about contracts, get Nolo's new book Contracts: The Essential Business Desk Reference, by attorney Rich Stim.