Top 3 Defenses to a Breach of Contract Claim
If you are a business owner, contracts are undoubtedly part of your daily life. You likely enter into contracts with clients or customers, suppliers, and investors, just to name a few. Most of the time those contracts are fulfilled without either party having any serious complaints. Occasionally, however, a problem does arise. For example, the other party to the contract might allege a breach of contract on your part. Although every breach of contract claim is unique, the Irvine corporate attorneys at Brown & Charbonneau, LLP explain the top three defenses to a breach of contract claim.
Top 3 Defenses
If you entered into a contract with another party, and the other party is now alleging that you breached the contract, there are a number of defenses that might potentially be available to you. Most defenses to a breach of contract claim are “affirmative defenses.” An affirmative defense is one that, once asserted by a party, that party must prove the defense. If the contract was entered into in the course of business, three of the more likely defenses you might have include:
- Misrepresentation or Fraud. Misrepresentation and fraud are similar with one important difference – intent. Misrepresentation occurs when one party accidentally misrepresents a material fact and the other party relies on that misrepresentation. Fraud occurs when one party intentionally misrepresents a material fact and the other party relies on that misrepresentation. For example, imagine that during the negotiation for the purchase of a building the seller assured you that a crucial easement that allowed access to the structure was valid for the next 100 years; however, it turns out that a filing error effectively invalidated the easement. If the seller did not know about the filing error when providing you with that assurance, you might be able to assert misrepresentation as a defense. If the seller did know about the error, you might be able to assert the defense of fraud.
- Impossibility or Impracticability. This defense might work for you if something happened after the formation of the contract that makes performance of the contract impossible or impracticable. To assert this defense, you cannot have created the reason for the impossibility or impracticability and you cannot have agreed to assume the risk of the occurrence happening as a term of the contract. For example, imagine that you own a company that makes widgets and you entered into a contract wherein you agreed to deliver 1000 widgets within the next week. Unfortunately, a freak snowstorm occurred at your factor in Arizona and your trucks could not dig out in time to make the delivery deadline. The other party alleges breach of contract for non-delivery of the widgets. You might be able to use the defense of impossibility based on a natural disaster that made it impossible for you to perform your obligations under the contract unless you agreed to assume the risk of natural disaster in the contract.
- Estoppel. Estoppel is a legal concept that refers to a situation wherein one party makes a statement that excuses the other party from performing under the terms of the contract, and the other party relies on that statement. For example, imagine that you took out a business loan for $100,000. All goes well for a couple of years until you run into a problem and you get behind on your payments. When you speak to your contact at the bank, she assures you that the bank will not take any adverse action (such as calling in the loan) for the next three months to give you the opportunity to catch up the payments. If the bank does take legal action against you for breach of contract before the end of that three month period you could assert the defense of estoppel.
Contact Irvine Corporate Attorneys
If you have additional questions relating to defenses to a breach of contract claim in California, it is in your best interest to consult with the experienced Irvine corporate attorneys at Brown & Charbonneau as soon as possible. Contact the team today by calling 714-406-4397 to schedule your appointment.