Fighting Back Against Breach of Contract Claims

Being accused of breach of contract is a serious legal matter, but you may have more defense options than you think. Contract disputes are rarely straightforward, and an experienced attorney can determine whether there are any complicating factors that could help your case. Here are some of the potential defense options that may apply to your situation.

An Invalid Contract

For there to be a breach of contract claim, there must first be a legally valid contract. This is always a defense worth exploring because many companies think they have a valid contract with a client or vendor, only to find out that it doesn’t meet the legal requirements in Michigan once an attorney gets involved. Generally, a contract must include an offer to exchange goods, services, or money. In some cases, contracts with overly vague terms can also be unenforceable under Michigan law. A contract must also be signed to be valid, a surprisingly common slip-up. 

Both parties must be legally capable of agreeing at the time of signing. This includes being of age, being able to make the company’s decision legally, and not being impaired or intoxicated in any way. They must also not be under duress or pressure and voluntarily enter the contract.

If you’re being accused of breach of contract, the first step should be for a business attorney to review the document carefully and ensure it’s valid. 

Fraud or Misrepresentation

A contract entered into based on fraud or misrepresentation isn’t legally valid in Michigan. However, you will need to prove that the fraud happened. A clear example is if one party didn’t actually sign the contract, and the signature was forged. A less extreme example could be one party lying about important issues relevant to the agreement, such as how many stores the business has or whether they can provide the agreed-upon services. 

Suppose a business hires a commercial cleaning company to service its three locations after being led to believe they have a large staff. However, it’s later revealed that the company only has two employees. This could be an example of fraud that may render the contract, and therefore a breach of contract claim, null and void.

The Other Party Breached the Contract First

In Michigan, a party that breaks a key part of a contract first may no longer have the right to enforce the agreement. This is known as the first material breach doctrine.

A material breach either significantly affects the purpose of the contract or fails to meet a core obligation contained therein. For example, a material breach could be delivering the wrong product entirely, while a minor breach may be accidentally double-shipping an order. 

In many cases, allegations of breach of contract happen after the relationship has already soured, and there have been repeated issues. Suppose a client repeatedly ignores invoices and hasn’t paid for services for several months. Your business decides to stop providing those services, which causes the client to miss an important deadline with their own client. They sue you for breach of contract. However, because you can show that they had the first material breach by not paying invoices according to the terms, any subsequent breach on your company’s part is excused.

Doctrine of Substantial Performance

The doctrine of substantial performance can be a defense in breach of contract cases where the defendant has largely fulfilled their obligations. It allows the defendant to show that they substantially performed the agreed-upon duties while providing room for minor issues. A scenario where the doctrine of substantial performance would apply as if a contractor used a different brand of materials, but the color and material type are precisely the same, and the work was completed on time and to spec. If the client sues, the contractor could argue that they substantially performed the contract. 

When determining whether this defense applies, the court considers various factors, including the contract’s overall purpose and whether any mistakes were minor or cosmetic. If the plaintiff still got the most value of the deal and the defendant acted in good faith, the court could rule that there was no breach of contract or substantially reduce the damages.

Outside the Statute of Limitations

The law provides a specific timeline for how long a party has to file suit against another person or business. This varies depending on the type of claim, but the statute of limitations for breach of contract claims in Michigan is six years in most cases. This default timeframe applies to written contracts and verbal agreements. However, if the contract specifies a different statute, it’s common for contracts to include a shorter time limit for disputes, which would take precedence. The timeframe starts when the breach happened, not when the plaintiff became aware of the suffered damages, which is an important distinction to be aware of. If another company tries to sue your business for breach of contract after the statute of limitations has passed, an attorney will ask for the case to be dismissed.

Breach of contract lawsuits can disrupt your business operations and potentially cost your company a great deal in damages. Having an experienced business litigation attorney on your side can help you fight back and protect the business you’ve worked so hard to build. At Kendal Law Group PC, our team has extensive experience with breach of contract claims, and we know what to look for and how to determine the right path forward for your company. Call today at 248-609-1718 to talk to an attorney.