How to Defend Against a Breach of Contract Claim

One of the most common business disputes involves a breach of contract, where lawsuits are filed because one party believes another party has failed to deliver on the terms of a written – or sometimes oral – contract.

If your business is ever involved in a breach of contract suit, you need to be aware of some of the ways you can defend yourself against a claim, including:

Statute of limitations has expired – Every state has a statute of limitations that specifies the time period in which a breach of contract suit must be filed. These can range from as few as three years to 15 years, and can differ depending on whether the contract was written or oral. If a suit is filed after the time period has expired, the claim is barred.

Fraud in the inducement – This is the use of a trick or deception to cause someone to enter into an agreement that is not in his or her best interest.

Duress – If someone is unduly pressured or forced into signing a contract, it is considered to be inequitable and cannot be enforced.

Impossibility of performance – If someone cannot meet the terms of a contract due to something that is beyond their control – a death or incapacity, the destruction of property necessary to perform, or if the contract calls for the performance of something that is prohibited by law.

Mutual or unilateral mistakes – If one or both parties were mistaken about the contract terms when they entered into the contract, this can be a legitimate defense for breach of contract.

Typically, most business people do not want to be in a situation where they feel compelled to breach a contract before the end of its term. Being upfront with the other party may relieve you from liability for bad faith or malicious dealing, and it may preclude the possibility of having to settle the matter through litigation. If you choose this step, be sure to consult with legal counsel on the best approach. In some instances, you may combine a personal chat with the principal of the other company with a follow-up by legal counsel.