Call Us For a Consultation: 775-210-0499

The cornerstone of any business relationship is the contract. A contract is a legally binding agreement between two or more parties, setting forth the rights and obligations of each party. It is an agreement that provides a framework for the conduct of the parties in the future and is enforceable by law. In general, when one party breaches the terms of a contract, the other party may be able to take legal action to enforce their rights.

Because a contract is legally binding and enforceable by law, it would seem that any violation by either party would constitute a breach of the contract and be easily proven in court. After all, what possible defense could a breaching party have for failing to perform its duty under the conditions of the contract?

You might be surprised. The answer is that the contract is only one aspect of the relationship between the parties, and there are numerous tactics and strategies that the parties can employ to protect their rights. In fact, contract disputes, similar to the rules of a sporting event, can be more complex than they appear on the surface. Despite being in black and white, opposing sides can interpret them differently under varying circumstances.

Before deciding to pursue litigation for a contract dispute in Reno, it is important to thoroughly understand your rights and options under the contract and the potential defenses that may be available to you or the other party. In all breach of contract cases, it is advised to retain the services of an experienced Reno business attorney to determine the best course of action for your situation.

Let’s take a look at some of the most common defenses to a breach of contract claim to help prepare you for what to expect.

Countering Breach Of Contract Claims

In breach of contract disputes, defendants often raise various defenses to challenge the plaintiff’s claims. While specific defenses depend on the circumstances of the case and the applicable laws, here are some of the more common defenses that businesses or individuals may assert in a Nevada breach of contract case:

1. Lack Of Breach: The defendant may argue that they did not breach the contract and properly fulfilled their contractual obligations. They may present evidence to demonstrate that they met the terms and conditions outlined in the contract. The plaintiff, on the other hand, may present evidence to demonstrate that the defendant clearly failed to uphold their end of the deal and did not meet their contractual obligations.

In this instance, the contract itself isn’t the issue; it is the failure to fulfill their agreement that is the primary issue, and the conduct of the parties with respect to their obligations under the contract will be the determining factor in the outcome of the case.

2. Failure Of Condition: If the contract is based on unfulfilled conditions, either before or after the agreement, the defendant has the right to argue that the plaintiff failed to meet those conditions. This would release the defendant from their obligations under the contract.  For example, a landlord can bring a breach of contract claim over a non-payment of rent, claiming that you owe them money under the terms of the contract. However, if the landlord did not meet their obligation with respect to maintaining proper conditions in the building or if they did not meet their obligation with respect to providing the premises for use, then you may have a defense to the breach of contract claim and could file a countersuit for damages for their failure by the landlord to meet their obligation.

3. Impossibility Of Performance: The defendant may claim that performance became objectively impossible by unforeseeable events beyond their control; also referred to as the “force majeure clause,” this defense may arise whenever a party finds itself unable to perform the contract through no fault of its own because the obligation could not be performed due to changes in the legal framework or because its performance has become commercially impracticable.

For example, if the defendant claims that their failure to perform was caused by an act of God, such as an earthquake, flood, or hurricane, and establishes that the natural disaster made it totally impracticable to complete the contract, then the defendant is excused from their liability to the plaintiff for breach.

4. Frustration Of Purpose: The defendant might claim that the contract was originally entered into for a particular purpose and that performance of the contract (by either party) would now be impossible or meaningless in light of new circumstances or events. This defense can discharge the defendant from his obligation.

Consider, for example, a situation in which a concert organizer makes a contract with a concert venue to arrange for a music event to take place on a certain date. In the months leading up to the event, however, the government announced a ban on public events or large gatherings in the wake of a public health crisis. 

The concert organizer might argue that because of the unforeseeable intervention of the ban, the performance is practically or commercially impossible (or senseless) to perform, and the object or aim of the contract is unachievable. The organizer may attempt to avoid fulfilling their obligations under the contract by citing frustration as a reason.

5. Duress Or Undue Influence: The defendant may argue that he or she signed the contract as a result of duress (threat or coercion) or undue influence, rendering the contract unenforceable as he or she was induced to enter it by improper pressure.

For example, if a big competitor threatens a small company’s owner that it will pursue a costly and damaging advertising campaign against his company unless he submits to a partnership agreement, the small company owner might argue that he entered the partnership under duress, because the agreement was induced by the threat of economic harm. He could argue that his agreement was not freely given and seek to have the contract declared voidable.

6. Mistake: If there were a common mistake or a unilateral mistake by one party that went to the essence or fundamentally transformed the terms of the contract, the defendant may raise this as a defense by arguing that the contract lacked mutual consent.

For example, a supplier provides a price for a product on its e-commerce website that is different from what it should have been. A customer places an order for the product at that price. The supplier could claim that there was a unilateral mistake in the pricing, and the contract should either be non-existent (void) or at least subject to negotiation (voidable) because the relatively low pricing was a wrong term of the contract that would not have been agreed to. The supplier may be able to correct or cancel the contract on the basis of a mistake defense.

7. Statute Of Limitations: The defendant could argue that the action has been brought beyond the time limit, or statute of limitations, after which time a legal action must be brought on a certain claim. The defendant has the right to request the dismissal of the action, arguing that it is barred by the statute of limitations.

8. Waiver Or Release: The defendant could contend that through his or her conduct, actions or explicit agreement, the plaintiff waived, released or otherwise voluntarily relinquished his right to enforce the contract. The defendant may assert that the plaintiff’s conduct evidenced an intent to relinquish his rights or that the plaintiff entered into an additional contract releasing his claims.

For instance, if there was a pattern of departures from a contract by one of the parties in providing the services to the other party, and the other party had not objected or put a stop to the departures, the party actually providing the services might later argue that the other party’s repeated acceptance and consent amounted to a waiver of strict adherence to the contract terms, and that the other party’s conduct evidenced a voluntary acceptance of the party’s right to enforce the specified provision of the contract.

9. Estoppel: The defendant might raise a defense of equitable estoppel, prohibiting the plaintiff from enforcing his right or benefit of the contract in light of his own conduct or even prior representations which encouraged the defendant, to his detriment, to rely on the conduct or representations.

One example of this is estoppel by representation in the sale of land, whereby Party A makes a representation to Party B that it will sell to Party B a parcel of land for a particular price. Party B relies on Party A’s representation by foregoing other opportunities, using time, resources and money to prepare the land for development. Party A refuses to sell the land to Party B on the terms represented or attempts to sell the land to someone else for a higher price. 

Party B is able to use the defense of estoppel by representation – that is, that they have relied on what Party A said, suffered loss, and that Party A should not be able to disregard its own representation.

10. Unclean Hands: The doctrine of unclean hands can sometimes be raised by the defendant, alleging that the plaintiff committed some wrongful, unlawful or immoral act relating to the contract; that because of such conduct, the plaintiff ought to be prohibited from enforcing the contract.

For example, suppose parties ‘Party A’ and ‘Party B’ enter a non-disclosure agreement to protect confidential information exchanged by each party. Party A then breaches the agreement by disclosing Party B’s confidential information to third parties, or by using that confidential information to enrich himself. Later, Party A attempts to enforce another agreement with Party B, such as a separate partnership or investment contract. 

Party B may then claim the unclean hands defense, arguing that Party A’s own bad conduct (breaching his NDA with Party B) would disentitle him to enforce his contract against Party B.

11. Lack Of Consideration: The defendant may make the argument that there is no consideration, or exchange of value, which renders the contract unenforceable because consideration is a necessary element of a binding contract.

For example, Sarah agrees to lend Tom $5,000 for a business venture without Tom having to repay the loan; later, Sarah decides to withdraw the loan and demands Tom repay her. Tom contends that the contract is unenforceable and that there was no consideration on his part, since he did not incur any obligation or undue burden in exchange for the loan. 

The contract is therefore invalid. No consideration means, in turn, no contract; without a binding contract, Tom argues, he shouldn’t have to repay the loan. If the court agrees with Tom, the contract would not be enforceable, and Sarah would have no remedy against Tom to recover the promissory note amount from him.

12. Fraud Or Misrepresentation: The defendant may allege that the plaintiff induced him to enter the contract through fraudulent or misleading statements about material facts or the concealment of material facts. The court or jury may find that the allegedly fraudulent representations rendered the contract voidable and thus unenforceable.

Financial fraud is present when Party A presents to Party B inaccurate or misleading financial numbers or projections in discussions that result in a contract or investment. If Party A enforces the contract and Party B learns the financial statements were fraudulent, Party B will ask for the contract to be terminated or seek compensation for losses. In making the request, they might say that the contract was signed on the basis of incorrect financial information and that the contract is thus void and invalid.

Get Professional Advice For Your Contract Dispute

When dealing with contracts, the situation is not always straightforward. Although the contract itself is crucial, there are numerous extenuating factors to consider when it comes to resolving contract disputes. So, whether you are taking legal action for breach of contract or defending against such claims, it is essential to be prepared. Getting advice on the best course of action and understanding the legal aspects of your case can best be achieved by consulting with an experienced business litigation lawyer.

If you require assistance regarding a breach of contract dispute in Reno or need help drafting, reviewing, or revising a business contract, our team at Sierra Crest Business Law Group is available to assist you. Contact us today for a consultation.