Defenses available in California breach of contract lawsuits

One of the most valuable relationships a Southern California business can have is with another business in which their interests dovetail. (Company A manufactures widgets and Company B sells the materials from which widgets are made.) Many times, the two will formalize their cooperation with a legal agreement that describes the services that are to be rendered and the compensation for those services.

Unfortunately, just as in marriages, families and friendships, disagreements sometimes arise. One of the most common business-to-business disputes involves breach of contract claims.

Defenses in breach of contract claims

There are a number of defenses available in breach of contract lawsuits. One of the most effective defenses is to show that you did, in fact, meet your obligations under the agreement.

Another available defense is to show that there was no enforceable contract for you to breach. We’ll take a look at this defense and others below:

  • No enforceable agreement: to be enforceable, a contract must have agreed-upon terms. If the businesses have left some critical terms to be worked out later, they might have nothing more than an agreement to agree, which can be unenforceable.
  • Limitations: the statute of limitations in California for a breach of contract claim is four years for written contracts and just two years for oral contracts. The limitations period begins when the contract is breached and the non-breaching business knows of the breach.
  • Illegal purpose: an entire contract is void in California if the agreement has an illegal purpose.
  • Unconscionable: if a contract is grossly unfair, it can be deemed unconscionable and is then unenforceable.
  • Under duress: a party can rescind a contract in our state if it was agreed to under duress (typically involving situations in which a person or property was unlawfully confined or threatened.)
  • Impossible: If contract performance becomes physically impossible (or so difficult or expensive that it’s no longer practical), the legal agreement can be unenforceable.
  • Frustration of purpose: similar to the impossible-impractical defense just described, this defense involves developments that alter the basic expectations on which the contract was based. Example: a hotel paid the golf course next door a monthly fee to allow its guests to play, but then the hotel burned down. While payment of the monthly fee is still possible, it’s now impossible to achieve the purpose of the agreement in the first place.

Breach of contract disputes can be resolved in litigation, but it can be more cost- and time-effective to conduct settlement negotiations or resolve the matters in arbitration or mediation.