Business disputes are on the upswing in the Metroplex, often due to supply chain constraints. This has led a lot of companies to sue others for breach of contract. If you have been sued, talk to your business attorney about your specific situation.
That said, here are five common defenses in a breach of contract action:
Impossibility/frustration of purpose/force majeure: Although these defenses can be seen as slightly different in legal terms, they share a common purpose. If you have one of these clauses in your contract, you could be excused from performance of the contract if something has occurred that was unforeseeable and beyond your control. In order to claim this defense, however, you must have the proper clause in your contract to begin with and it must cover the situation you’re experiencing.
Statute of limitations: This is a law that limits the time period for filing a particular type of lawsuit. If the statute of limitations has run out, the plaintiff will generally not be able to succeed in a lawsuit against you. However, there are certain actions, such as fraud, that could “toll” or extend the statute of limitations. The Texas statute of limitations for breach of contract is four years, in most cases.
Statute of frauds: Some contracts have to be in writing and signed by the defendant or they are invalid. In Texas, these contracts are covered by the statute of frauds:
- Contracts that can’t be performed within a year
- Contracts for the sale of goods worth more than $500
- Contracts for the sale of real estate
If you agreed on a handshake and your contract involves any of these three types of things, it may not be enforceable in court.
Failure of consideration: This is a defense in a specific type of contract where the plaintiff is required to do something before the defendant can be required to act. For example, if your contract requires half the project’s cost to be paid up front and the other party did not do that, you generally could not be successfully sued.
Substantial performance: This is a defense when you have essentially met your end of the bargain, but the other party is complaining about non-performance of something that has no economic impact. For example, a contractor would generally be viewed as having substantially performed its contract if the job is done but the buyer is unhappy with the paint color.
There are other possible defenses to a breach of contract suit. Talk to your business attorney before attempting to resolve the dispute on your own.