Breach of Contract Defenses: Everything you Need to Know
Breach of contract defenses are legal arguments presented by defendants in response to breach of contract claims.4 min read
2. Expectation Damages
3. Reliance Damages
4. Restitution Damages
5. Common Defenses to Breach of Contract Allegations
6. Minor or Mutually Agreed Upon Breaches
7. Invalidating a contract
8. Arguments in the Alternative
Breach of contract defenses are legal arguments presented by defendants in response to breach of contract claims. A breach of contract is a failure of one or more parties to meet the terms of a contract. In some instances, the breach of contract may be argued before a court of law. Typically, in a breach of contract claim, the plaintiff (the breached party) must prove:
1.the existance of the contract
2.that the plaintiff has satisfied the terms of the contract
3.that the defendant has not satisfied the terms of the contract
4.that the defendant's non-compliance has caused quantifiable losses to the plaintiff (called damages)
Types of Damages
There are three primary types of contract damages, including:
Expectation damages are a loss of income incurred by a plaintiff due to a breach of contract. For example, if a plaintiff expected to receive profits from a sale that could not occur because of the defendant's breach of contract, the defendant may be assessed damages equal to the plaintiff's expected profits from that sale.
Reliance damages represent costs incurred by the plaintiff in executing a contract breached by the defendant. Costs may include out-of-pocket expenses and opportunity costs incurred by the plaintiff. For instance, reliance damages may be awarded when a plaintiff purchases materials for a construction project that was not completed because of the breach of contract.
Restitution damages may represent goods, services, and consideration paid by the plaintiff to a defendant who breached the contract. The breaching party may be required to restore the goods, services, and consideration to the plaintiff.
In addition, a court of law may require the breaching party to fulfill one or more terms of the contract, called specific performance.
Common Defenses to Breach of Contract Allegations
First, a defendant may directly argue against a breach of contract claim. In particular, they can provide a term-by-term explaination of how they satisfied the requirements of the contract.
In addition, a defendant could also argue that:
1.the breach was minor or mutually agreed upon
2.the contract is invalid
Minor or Mutually Agreed Upon Breaches
A breach of contract that does not cause a plaintiff substative damages and/or does not substatively affect the contract may be considered a minor breach. Typically, defendants are not liable for minor breaches.
Alternatively, a defendant may argue that the plaintiff intentionally waived his or her right to enforce one or more terms of the contract. These waivers may be explicitly included in a contract or a defendant may argue that such a waiver is implicit (e.g., when an excessive amount of time elapses before a plaintiff makes a breach of contract claim).
In addition, a defendant may argue that a contract has been accepted as performed. This occurs when the plaintiff accepts either the performance of the contract or a substitute performance as adequate.
Invalidating a contract
Typically, for a contract to be voided, both parties must breach the contract. A defendant could, for example, argue that he breached the contract as a result of a breach of contract by a plaintiff and/or that the plaintiff had knowledge of the defendant's breach of contract, but did not attempt to resolve it.
In addition, if a defendant were forced to enter into a contract under duress or if the terms of a contract are highly one-sided, a court may invalidate the contract. Also, if performing a contract represents an undue hardship for the defendant or if an event occurs after the execution of the contract that makes performing the contract impractical, a court may void the contract. Further, if a plaintiff misrepresented a substantive element of the contract, and the defendant relied on the misrepresentation, the contract may also be voided.
Next, if a defendant lacks capacity to execute the contract (e.g., the defendant is a minor), the contract is voidable. If either a court of law could not understand the essential elements of a contract or if the defendant did not consider the contract to be finalized, the contract is also voidable.
In addition, if the contract requires the performance of an illegal action, the contract is voidable. However, in some courts of law, only the illegal terms of the contract may be voided, while the remaining elements of the contract may remain in effect.
Arguments in the Alternative
A defendant may chose to argue in the alternative in a court of law. Accordingly, each defense presented by the defendant is considered individually, regardless of whether one argument may contradict another. For example, a defendant may argue that a contract is voidable. The defendant may further argue that he did not breach the contract. The defendant may conclude by arguing that his breach of contract was minor.
Importantly, in some instances, a defendant may not be permitted to present new arguments after various points in the court proceedings. Accordingly, it is recommended that a defendant present all arguments at the outset of a breach of contract case.
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