Key Takeaways

  • A counterclaim for breach of contract allows a defendant to assert their own claims against a plaintiff in the same lawsuit.
  • Counterclaims may be compulsory (arising from the same transaction or occurrence) or permissive (unrelated).
  • Defendants can assert affirmative defenses that may mitigate or eliminate liability, including fraud, illegality, mutual mistake, and unconscionability.
  • Tactical strategies such as settlement offers, delay, or disputing contract modifications can affect the outcome of a contract dispute.
  • Courts may consider alternative defenses simultaneously, even if they contradict one another.
  • Legal procedures and deadlines must be followed carefully to preserve the right to raise a counterclaim or defense.
  • Construction and business disputes frequently involve complex counterclaims and defenses due to the multi-party nature of contracts.
  • You can find experienced attorneys on UpCounsel to help navigate these legal matters.

A counterclaim for breach of contract is used to defend oneself against an opposing party after an initial claim has been filed. In other words, it is a claim made by the defendant against the plaintiff, who has accused the former of breaching their contract. Defendants may make their own claims against the plaintiff.

During the trial, the defendant presents counterclaims in an offensive position, while the plaintiff acts from a defensive position. In this way, the defendant must provide evidence to prove the counterclaims. The plaintiff's claim may be nullified if "common law compulsory counterclaims" are proven. If the defendant does not make these counterclaims, they will be unable to sue on them in a later lawsuit. As an example, if Business A sues Business B for breach of contract and Business B does not raise any counterclaims, they can not later sue Business A for fraudulent contractual terms.

Additional categories of compulsory counterclaims exist in certain jurisdictions.

  • One example is Rule 13 of the Federal Rules of Civil Procedure, which requires defendants to raise as a counterclaim any already existing claims they have against the plaintiff, if it "arises out of the same transaction or occurrence", as one of the claims made by the plaintiff.
  • Another category of counterclaim is permissive counterclaim, which concerns matters unrelated to the plaintiff's claims. In just one lawsuit, parties have the ability to resolve every one of their disputes, whether related to each other or not. If both the plaintiff's claims and the defendant's counterclaims concern the same fundamental issues, a court will typically address them both at the same time. If the counterclaims concern significantly different issues, a court will likely choose to deal with them separately.

Tactical Defenses to a Breach of Contract Claim

Defendants may respond to a breach of contract claim in numerous ways. Some breach of contract defenses may be tactical (logistical) routes and others may be legal.

For example, delay is often used as a tactical defense, whether to simply frustrate the plaintiff or to buy time in order to raise legal funds. A defendant may deny that they've received any claims form. This usually means they have not filed an acknowledgment of service and instead a judgment in default of defense is then issued. Once the judgment arrives, the defendant may appeal it on the basis that they weren't aware of the proceedings until then.

Delay is often a risky strategy because the defendant must prove that they never received the claim and must also present an arguable defense. Courts have recently become stricter with issues of non-compliance, but a determined defendant may still be able to buy several months of time using this tactic.

Another tactical defense is to claim that the written contract was altered after its signing. It's easy to claim that a conversation altered the contractual terms in a way that challenges the claim that it was breached at all. In order for the court to test the truth of this claim, it's necessary to receive oral evidence, which generally cannot occur until a final hearing (trial). This can take many months to reach. However, if a claim cannot be proven in trial, it may end up being very costly for the defendant.

A settlement offer may be another tactical strategy for a defendant. Even if it's quite clear that a breach of contract has occurred, the accurate assessment of damages may be clear. The plaintiff will need to calculate their loss, which may result in errors. Thus, the plaintiff may claim the defendant owes an incorrect amount.

If the defendant offers to settle for less, it may pressure the plaintiff into accepting. This is because if a case goes to trial and the plaintiff is granted an amount less than the amount already offered, the plaintiff may end up paying for both their own costs and the defendant's. However, this does not often apply in small claims cases, which comprise the majority of breach of contract cases.

Making a counterclaim will also raise the tension in the case and may cause the plaintiff to carefully consider if and how they want to proceed. It may even cause the plaintiff to seek an early resolution. However, there are significant risks and costs associated with raising a counterclaim and it still proceeds, even if the initial claim has been closed.

Common Affirmative Defenses in Contract Disputes

In addition to tactical maneuvers, a defendant may assert affirmative defenses in response to a breach of contract claim. Unlike general denials, affirmative defenses introduce new facts that, if proven, negate liability even if the breach occurred.

Common affirmative defenses include:

  • Fraud or Misrepresentation: The defendant may assert the contract was induced by false statements.
  • Duress or Undue Influence: If the defendant was coerced into signing the contract under threat or manipulation.
  • Lack of Capacity: A party lacking legal ability (e.g., minors, mentally incapacitated) to contract may void the agreement.
  • Mutual or Unilateral Mistake: A significant misunderstanding about a basic term may make the contract unenforceable.
  • Illegality: Contracts involving illegal activities or violating public policy cannot be enforced.
  • Unconscionability: Courts may refuse to enforce extremely unfair contracts created due to imbalanced bargaining power.
  • Statute of Frauds: Some contracts (e.g., for real estate or lasting over one year) must be in writing; oral versions are unenforceable.
  • Estoppel: If the plaintiff previously waived a contractual requirement or indicated performance was unnecessary, they may be barred from enforcing that term.
  • Impossibility or Impracticability: Unforeseen circumstances making performance impossible or unreasonably difficult can excuse nonperformance.

These defenses can reduce or eliminate liability and are particularly effective when supported by documentation or third-party evidence​.

Counterclaims in Construction and Commercial Contract Disputes

In industries like construction and commercial development, counterclaims for breach of contract are especially prevalent due to the complexity and multi-party nature of projects. Subcontractors, suppliers, and general contractors may all have distinct contractual obligations and opportunities to assert counterclaims.

For example, if a general contractor sues a subcontractor for delay, the subcontractor may counterclaim that the delay was caused by the general contractor’s failure to provide access to the site or deliver required materials on time. This shifts liability and can reduce or eliminate damages.

Typical counterclaims in commercial and construction disputes may include:

  • Non-payment for completed work
  • Delays caused by the other party
  • Poor project management or coordination
  • Negligent design or misrepresentation of project scope
  • Breach of implied warranties

A successful counterclaim for breach of contract not only defends against the initial lawsuit but may result in the defendant recovering damages or enforcing contractual rights​.

Arguing in the Alternative

When responding to a breach of contract lawsuit, defendants can assert alternative defenses, even if they seem contradictory. This strategy is common and legally permitted.

For instance, a defendant might argue:

  • The contract is invalid due to lack of consideration or fraud;
  • Alternatively, that they fully performed their obligations;
  • Or, if they did breach, that the plaintiff exaggerated the resulting damages.

By presenting multiple theories, the defendant maximizes their chances of a favorable outcome. Courts understand these are not admissions of guilt but rather legal strategies meant to cover all bases during litigation​.

Procedural Considerations for Counterclaims

When making a counterclaim for breach of contract, timing and procedure are critical. Under Rule 13(a) of the Federal Rules of Civil Procedure, a compulsory counterclaim must be filed in the same proceeding if it arises from the same transaction or occurrence. Failing to do so forfeits the right to bring that claim later.

Key procedural tips:

  • File promptly: Counterclaims are typically due at the same time as the answer to the original complaint.
  • Gather supporting documentation: Contracts, communications, change orders, and evidence of performance bolster the counterclaim.
  • Avoid waiver: Not asserting a compulsory counterclaim may bar future litigation on the issue.
  • Consider jurisdictional rules: State courts may differ in how they handle permissive vs. compulsory counterclaims.

Proper legal strategy and early planning with an attorney can ensure that valid counterclaims are preserved and effectively argued.

Frequently Asked Questions

1. What is a counterclaim for breach of contract? It is a legal claim brought by the defendant in response to the plaintiff’s breach of contract lawsuit. It allows the defendant to allege that the plaintiff also failed to fulfill contractual obligations.

2. When should I file a counterclaim? A counterclaim should be filed at the same time as your response to the complaint, particularly if it is a compulsory counterclaim related to the original dispute.

3. Can I make a counterclaim even if I breached the contract? Yes. You can assert that the plaintiff also breached or that you had a legal justification, which can reduce or eliminate liability.

4. What’s the difference between a counterclaim and an affirmative defense? A counterclaim is a new claim against the plaintiff, while an affirmative defense explains why the plaintiff’s claim should fail even if their allegations are true.

5. Can I include multiple defenses in my response? Yes. Courts allow you to argue multiple defenses, even if they conflict, as long as they are plausible and supported by evidence.

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