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I’m being sued for breach of contract. What do I do?

If you have been served with a breach of contract lawsuit, don’t panic. It may not be fun, but it’s not the end of the world. You may fear that you will be forced to pay money, but there are a lot of steps that take place before you reach that point.

Your first step is to make sure you are actually being sued. In some cases, what you have received may be merely a demand, not a lawsuit. Show the paperwork you received to your attorney if you aren’t clear on what it means.

Next, figure out if you did breach your contract. Did you have a valid contract? If so, what was the reason for the breach? It matters because there are sometimes defenses available even though you didn’t completely fulfill your part of the bargain.

For example, in today’s market there may be an impossibility or “force majeure” defense. This is a defense that claims that unforeseeable, unavoidable forces made it impossible for you to fulfill your contract. Whether you can claim it depends on whether you have a force majeure clause in your contract and, if so, what it says. In many cases, the contract will be canceled if force majeure has made it impossible to fulfill.

Similarly, you may have an Act of God clause in your contract that results in cancellation when the breach was solely due to an unavoidable natural circumstance and not through any fault of the parties.

Commercial impracticability can be difficult to prove, but it basically means that there is no way to fulfill the contract due to unforeseen circumstances besides force majeure or Acts of God. It is not enough to say the contract cannot be fulfilled profitably, or even that you would suffer economic hardship if you were forced to fulfill the contract. You must show that your performance of the contract is extremely impracticable through no fault of your own. For example, something necessary to the completion of the contract is no longer available at all, or government regulations keep you from being able to fulfill your part of the bargain.

Substantial completion is when you have fulfilled all of the most important parts of the contract, leaving only details remaining. This occurs when the other party can fully use the item you promised to provide, even if it isn’t perfectly finished.

You can still try to settle the claim

Even if you don’t have an obvious defense for your breach of a valid contract, there is still no reason to panic. This is because you can still initiate negotiations or mediation to settle the dispute even after a lawsuit has been filed.