Contracts are essential when doing business; and, in a perfect world both sides would benefit from the contract and no disputes would arise. However, delays, financial problems, pandemics, and other unexpected issues can occur that may prevent a party from fulfilling its obligations or performing the promises dictated in the contract – and as a result, a party may find itself in breach of contract. If you are being sued for breach of contract, what should you do?
Hire an Experienced Lawyer
Upon being served, defendants have just 20 days in Texas to respond by either filing an answer or some other responsive pleading. This time can pass quickly, and to ensure you are responding appropriately to being sued, you should, at the very least, consult with an experienced commercial litigation attorney to review your options. If you require an extension of time, your attorney can request an extension from opposing counsel so you can review all of your options more thoroughly. Your attorney may also suggest a variety of strategies that can only be pursued at the very beginning of the case, including filing a motion to dismiss for lack of jurisdiction and/or to change venue. An experienced attorney will guide you through the various legal strategies involved.
Defenses Against a Breach of Contract Claim
There are many valid defenses one can claim when being sued for breach of contract. Researching the contract and finding potential defenses will be vital to defending against a breach of contract lawsuit. You and your lawyer must review and research the contract and any addendums and determine potential defenses. For example, defenses to a breach of a contract caused by COVID could include:
- Force Majeure – The defense of force majeure is based on a contractual provision agreed upon by both parties when a contract was written. Force majeure is not a commonly used defense; however, it can be used when circumstances beyond a party’s control absolve or delay its performance obligations and can be used to offer other types of equitable relief.
- Act of God – An “Act of God” in the legal sense means an inevitable accident that cannot be prevented by human actions or foresight. This affirmative defense requires that an occurrence caused directly and exclusively by the violence of nature be the reason for the breach of contract. In Texas, in order for the court to allow this defense, evidence must be presented to support the fact that the phenomenon could not have been reasonably foreseen.
- Economic Duress – Another defense recognized in contract law is “economic duress.” Economic duress stems from one party threatening economic loss to another party. One party to a contract may threaten to cancel the contract unless the other party agrees to new demands. Duress is caused because there is no reasonable alternative than to simply agree to the new contract or addendum to the contract. Although a tort or crime does not need to be shown for this defense, it must still involve a wrongful act that would make a reasonable person agree to changes under its pressure.
- Impossibility of Performance – Another contract defense is the impossibility of performance. This applies when the contractual duties would be impossible for anyone to perform after unforeseen events occurred that were beyond the control of either party. You may not be held liable for breaching a contract that was impossible to perform; however, be aware of any negligent acts that occurred before the events that made performance impossible. Any negligence on your part may lead to the impossibility defense not being upheld.
- Frustration of Purpose – If the main purpose of the contract has been defeated by external events not caused by either party, you may be excused from performance entirely, even if you could still fulfill the terms of the contract. If trying to assert a frustration of purpose defense, you must have documentation of the original purpose of the contract and why that purpose has now become null and void.
Be Prepared for Remedy
If the court does find that you have breached your contract, the other party may be entitled to relief under the law called a remedy. The typical remedies for a breach of contract are:
- Damages – Paying damages to the suing party in a breach of contract lawsuit is the most common remedy. The damages may be compensatory, punitive, nominal, or liquidated.
- Specific Performance – If payment does not remedy the situation, the non-breaching party may seek court-ordered performance of the contract, known as specific performance.
- Cancellation and Restitution – The non-breaching party may opt to cancel the contract and decide to sue for restitution, which would return them to the position they were in before the breach occurred.
Experienced Texas Contract Lawyers
Founded in 1946, MehaffyWeber is a business litigation firm with decades of trial experience. We have been recognized for our courtroom prowess by Chamber & Partners, ranked nationally as a Tier 1 Law Firm by U.S. News & World Report, and have been recognized as a “Go-To Law Firm” for litigation by Corporate Counsel. MehaffyWeber stands ready to assist your business with issues related to contracts and the coronavirus, so please let us know how we can help.