CALL US 24/7! (646) 386-0990

8 Potential Defenses Against A Breach Of Contract Claim (With Examples)

by | Dec 18, 2023

Being accused of breaching a contract is no small matter.
Regardless of how the situation gets resolved, it’s going to be an interruption to your goals.
You face having to either negotiate and offer a monetary settlement or uphold the original terms in order to move forward, or you face having to enter into arbitration or litigation, where arbitrators or a judge or jury will make the final call about whether you owe compensation to the other party or not (and if so, how much).
If the case gets dragged out in court, and/or if the other side’s breach of contract claim against you is successful, then you may have to pay significant damages. That’s why having a good defense is so important in these situations! You shouldn’t have to pay for it when you were trapped in a bad deal.
Here are 8 potential defenses against a breach of contract claim that you may be able to use:
1. Lack Of Capacity
What It Is: Every contract, in order to be legally valid and enforceable, has to have a few elements. There has to be an offer, an acceptance, consideration (something of value that is exchanged by both parties), capacity, awareness, and legality. Capacity refers to your (and the other party’s) ability to enter into a binding contract. This means that both you and the other party have to be of sound mind and minimum legal age at the time the contract is formed, or else it is not binding.
Example: Say that you and a business partner go out to a bar to celebrate some success, and you end up intoxicated. While you are both celebrating, your partner proposes a new venture, and you accept the deal (and sign an actual document). The next morning you wake up to a sizable hangover and realize the terms of the contract are actually putting you at a huge disadvantage. You will likely be able to argue that you didn’t have capacity at the time you signed.
2. Lack Of Awareness
What It Is: Awareness is similar to capacity, but it refers to the knowledge rather than the ability to enter into a binding contract. Both parties must acknowledge the contract exists and agree that they are bound to its obligations. (This is also referred to as mutuality, or as the “meeting of the minds”).
Example: This is common in cases where the terms of the contract were ambiguous or poorly written. Say that the contract stated that you had to pay a certain amount of money in exchange for specified services. You honestly believed, based on the way that the contract was presented and written, that your payments would be made in intervals during the course of the time that the services were rendered and the project would take to complete (a number of years) but the other party claimed that the contract required you to pay it all before the project was complete.
If a reasonable person reviewing the contract could interpret it as you did, then a meeting of the minds didn’t occur, and you cannot be held accountable for an understanding that you didn’t have.
3. Undue Influence Or Duress
What It Is: Both undue influence and duress refer to pressuring someone to sign a contract – their signing isn’t of their own free will. Duress involves a direct threat, while undue influence is more about a difference in power dynamics.
Example: Say that you are a vendor and a large corporation hires yours to do a service; however, the terms of their agreement with you are less than desirable, so you refuse. They threaten to smear your reputation or sue you if you don’t go through with the contract. Because you are a small operation, even though you are in the right, you are scared by the costs of litigation or the business you could lose if they act on their threat – your business might not survive if you don’t sign the contract. That’s duress! Duress must involve the believable threat of serious harm and the party must enter the contract for their own protection.
Undue influence might be if an elderly individual who owns a piece of land and has no knowledge of real estate matters is approached by a corporation who offers to buy it at a fraction of its value and presents it as a great deal. There is already a power imbalance, and if the company acts as if this is a “once-in-a-lifetime” deal, and uses high pressure tactics and confusing terms, then that would be undue influence. Undue influence must involve a vulnerable victim and resulting inequity.
4. Fraud Or Misrepresentation
What It Is: The party (or parties) you are entering into a contract with misled you about the circumstances that caused you to enter into the contract, and you relied on that misrepresentation, which resulted in your economic loss. This is also known as fraud in the inducement.
Example: Say that your company is approached with an offer to buy another company, but the financial statements about that company’s health are misleading. The company did this so that you would be more likely to buy them out; you make an agreement, but when you begin the process, you discover the fraud. You stop the deal, and they attempt to bring a breach of contract claim against you, but you can bring this as a counterclaim!
5. Impossibility (Or Impracticality) Of Performance
What It Is: You could raise this defense if an unforeseen event occurred after the contract was made that made it impossible for you to uphold your end of the deal.
Example: Weather or natural disasters, injury, and new government laws are all common examples of impossibility of performance defenses. If you worked for an entertainment agency that contracted with other entities to provide talent for certain events, but your employees all went on strike or quit, or perhaps they were all injured in a freak accident that occurred at your place of business, you wouldn’t be able to replace the talent (in a reasonable enough amount of time to make it for the scheduled performances). The recent pandemic was also a good example of this; while it may not have been impossible to uphold certain contracts, the virus and lockdowns definitely rendered many situations impractical (and the event raised costs for many materials and goods, as well).
6. Waiver And Estoppel
What It Is: If the other party has a right to enforce something, but waives that right either through making a statement or acting in such a way that leads you to believe they are waiving that right, they can’t suddenly claim a breach when they decide to enforce that right (estoppel).
Example: Say that your business is struggling, and your commercial landlord lets you know that they will accept late payments to help you out. You make late payments for six months, and they never say anything, but then on month seven they decide to evict you; that’s not going to fly in court, because they waived their right to on-time payments with you.
7. Bad Faith
What It Is: If the other party didn’t act fairly and reasonably and honestly with you when making the contract, and later accuses you of breaching it, you can argue that they made it in bad faith. 
Example: Say that the other party unreasonably delayed the delivery of the goods they promised in the contract because they wanted to get something out of you in addition to the terms of the contract (and were in essence, using the delay to apply pressure). If you didn’t deliver on your end of the contract in order to pressure them to deliver your goods, and they bring a breach of contract claim against you, you can argue that they acted in bad faith in the first place.
8. Unclean Hands
What It Is: This is a defense that can go hand in hand with some of the other defenses listed above; if the other party accuses you of breaching the contract, and you did, but they also breached the contract, then you can argue that they shouldn’t be entitled to a remedy or relief because they were also at fault. When both parties are at fault, neither party may be held liable.
Example: Say that you entered into a contract where the other party misled you about its terms. You found out about this, and you did not intend to fulfill the terms (though you didn’t tell them that). They suspected you of an anticipatory breach, so they bring a claim against you, but you can argue that because they misled you, they were also in the wrong.
Facing A Breach Of Contract Claim? Let Pitcoff Law Group Protect Your Interests!
At Pitcoff Law Group, our experienced and talented team of business litigation attorneys can work with you to structure the strongest defense against a breach of contract claim.
We can work to resolve it out of court, to save you time and money, but we are more than capable of defending you in court if necessary.
You can trust our firm to achieve the best resolution!
We know these types of situations can be complex; our goal is to make legal, simple.
Call today to see if you qualify for a free consultation.
We would be happy to assist you.