As a small business owner, you’ve likely signed many contracts—and you will likely sign many more. Usually, these business agreements are simple and straightforward. You and the other party agree to an arrangement, and then you follow through on that arrangement. The contract concludes.
However, no matter how clear the language of your contract is and no matter what your intentions, sometimes it is not possible to fulfill a contract. In other words, you breach the contract. You may have a legitimate reason for doing so. There are legal defenses available to you in case the other party decides to sue.
What are the five most common legal defenses?
- Fraud: For this defense, you must prove that the other party knowingly misrepresented the truth in the contract. The key word there is “knowingly.” This can be difficult to prove.
- Duress: If someone compelled you to sign the contract by physical force or manipulation, you can use duress as a defense. Both parties signing a contract must do so of their own free will. If this is not the case, you have legal recourse.
- Undue influence: Very similar to duress, you can argue this defense if the other party had power over you and exerted it to get you to sign the contract.
- Mistake: While a mistake by one party doesn’t invalidate a contract, if both parties make a mistake regarding the subject of the contract, you can use this defense.
- Statute of limitations: If the statute of limitations has expired on the breach of contract, you can use this defense to ask for the court to dismiss the case.
Sometimes, there are valid reasons for breaching a contract. Circumstances matter in legal defense cases. Offer clarity when you meet with legal counsel so that the court hears all the pertinent facts and make the appropriate determination on your case.