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.

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