Businesses enter into all types of contracts on a regular basis. These contracts may include employment contracts, contracts with vendors for goods and services, and commercial leases. While the best-run businesses take preventative steps to avoid contract disputes, these types of disagreements still occur in some circumstances. When a contract dispute occurs, you should immediately take the steps necessary to defend your business against any breach of contract alleged by the other party.
Whenever your business is sued based on allegations of breach of contract, you have the right to raise all affirmative defenses that might enable you to defeat the other party’s claims. Keep in mind that if you don’t raise all possible defenses, the court might decide that you have “waived” these defenses, or that you can no longer use the defenses in the lawsuit. Your defenses will differ according to the type of contract involved and the circumstances surrounding the alleged breach.
One defense may be that the alleged breach of contract is not material or significant enough to the contract so as to justify rescission or termination of the contract. If a vendor is alleging that you failed to pay for goods delivered to you, for instance, the alleged breach is likely to be material. However, if the vendor is just alleging that your business paid for the goods on the wrong day of the month, then the alleged breach may not be so material.
Another defense is that the statute of limitations on the other party’s claim has expired. California law provides that any suit based on a written instrument must be filled within four years of the alleged breach. For an oral agreement, the statute of limitations is two years. If the claim is filed past the applicable statute of limitations, then your business can argue that it should be dismissed for that reason.
Yet another potential defense is failure of consideration or failure to perform. For example, if your business contracted with a vendor to purchase certain goods, but the vendor fails to provide the specified goods as agreed, then you are likely to have a valid defense if you fail to pay for the goods as agreed.
Even the most careful planning cannot always avoid disputes that arise with business contracts. Fortunately, the Heit Law Group, P.C., is here to give you the common sense, down-to-earth legal advice that you need as you are dealing with problems that potentially may occur. Our California business law attorneys advise many businesses on a regular basis and have valuable knowledge about how to best provide creative solutions for common business problems, including allegations of breach of contract, depending on your needs. By contacting our office right away, you will place yourself in the best position possible to avoid contract disputes with other parties, and to deal with these types of dispute as they arise.