Many businesses in Oakland enter complex contracts with vendors, clients and other businesses. These documents are an essential part of business development, but there are times when one party argues that you breached the contract and owe them damages. Do you have any defenses when you are on the receiving end of a breach of contract claim?
What is breach of contract?
A breach of contract occurs when a valid contract exists, and one side to the contract does not fulfill their duties per the terms of the contract. Breaches can be either minor or material.
A minor breach of contract occurs when the breaching party does not fulfill some part of the contract, but the nonbreaching party still receives what they bargained for. For example, unless a firm deadline is included in the contract, a reasonable delay may be determined to be a minor breach of contract. If a breach is minor, the nonbreaching party still must fulfill their duties per the terms of the agreement but they are still able to pursue compensation for damages incurred due to the minor breach.
A material breach of contract occurs when the breaching party does not fulfill some part of the contract and the nonbreaching party therefore receives something significantly different than what they agreed upon. For example, if the contract was for 100 screwdrivers and the nonbreaching party received 100 hammers, this may be determined to be a material breach of contract. If a breach is material, the nonbreaching party no longer is obligated to fulfill their duties per the terms of the agreement and can pursue compensation for damages incurred due to the material breach.
Defenses to breach of contract
If you are accused of breaching a contract, there are several defense arguments you may be able to make. For example, if enforcing the contract would violate public policy, the contract may not be enforceable. If the purpose of the contract has become impossible, this may also make the contract unenforceable. If the terms of the contract are for activities or products that are illegal the contract cannot be enforced. All contracts require consideration, that is an exchange of products, services or money. If there is no consideration, such as is the case of a gift, the contract cannot be enforced. If a contract is fraudulent, the contract cannot be enforced. If there was either a mutual mistake in the contract or a material unilateral mistake, this will also make the contract unenforceable.
Know your rights
If you are served with a breach of contract claim and are facing contract litigation you will want to know all your defense options to protect your business. Having a concrete understanding of some common defenses is a good starting point to protecting your interests.