Defenses to Breach of Contract

What are Defenses to a claim of breach of contract?

A party may prevail on a claim for breach of contract only by pleading and proving all the requisite elements claim.  Therefore, one defense is the assertion that the plaintiff failed to properly plead and prove the elements of this cause of action (i.e. Existence of Contract, Material Breach, Damages resulting from the breach).  Here are some more available defenses:

Pursuant to the Fla. R. Civ. P. 1.110, the following defenses must be affirmatively pled in the answer: accord and satisfaction; arbitration and award; assumption of risk; contributory negligence; discharge in bankruptcy; duress; estoppel; failure of consideration; fraud; illegality; injury by fellow servant; laches; license; payment; release; res judicata; statute of frauds; statute of limitations; waiver; and any other matter constituting an avoidance or affirmative defense. 

Statute of Limitations Expired The statute of limitations for a breach of written contract is five years, while for an oral contract, it’s four years. The limitations period starts running when the last element of the cause of action occurs. Notably, the “discovery rule” doesn’t apply to breach of contract actions in Florida, as the Florida Supreme Court explicitly ruled that the limitation period in Florida Statute § 95.11(2)(b) isn’t extended by the absence of discovery of the breach within the specified timeframe. Furthermore, actions for breach of contract are barred five years after the cause of action accrues, regardless of whether the plaintiff was aware of their claim.

Accord and satisfaction. Florida law defines an accord and satisfaction as a new agreement between a debtor and a creditor, resulting from the debtor’s tender of payment to the creditor, who accepts and negotiates in full satisfaction and discharge of a prior disputed debt. A fundamental principle underlying this doctrine is that there must be a dispute regarding the original amount owed, and the compromise or settlement must differ from that amount. An accord and satisfaction becomes a legal matter when the creditor accepts payment, specifically stipulating that its receipt constitutes a full or complete satisfaction of the original dispute. 

Arbitration and award. If the defendant fails to request arbitration and instead responds to the complaint, they waive their right to arbitration, even if their response affirms arbitration as an affirmative defense. “By agreeing to arbitration, a party does not relinquish substantive rights granted by statute or common law. They merely consent to submit the dispute to ‘resolution in an arbitral, rather than a judicial forum.’” 

Discharge in bankruptcy.  The defendant’s discharge in bankruptcy can bar  recovery by the plaintiff.

Duress. Duress necessitates a demonstration that the act was involuntary and resulted from improper or coercive conduct by the other party. Generally, under Florida law, the defendant cannot succeed solely on the grounds of duress or coercion unless the improper influence originated from one of the contracting parties. Third-party actions will not suffice in this regard. However, an exception exists when the duress or coercion arises from the mediator assigned to resolve the parties’ dispute. Consequently, a claim that possession was acquired through duress cannot be included under the general assertion that a party lacked the right to possess the property.

Estoppel.  The “elements of estoppel must be proven by clear and convincing evidence.” Collateral estoppel is a legal doctrine that generally prevents identical parties from relitigating issues that have already been decided between them. Equitable estoppel, on the other hand, “estops” or bars a party from asserting something (such as a fact, a rule of law, or a defense) that they would otherwise be entitled to claim. To establish a cause of action for promissory estoppel, a plaintiff must present facts that, if accepted as true, demonstrate (1) that the plaintiff relied detrimentally on a promise made by the defendant, (2) that the defendant reasonably anticipated the promise would lead to the plaintiff’s action or forbearance, or that of a third party, and (3) that enforcing the promise against the defendant is the only way to avoid injustice.

Failure of consideration.   A fundamental principle of contract law is that a promise must be supported by consideration for the contract to be enforceable. Similarly, any modification of a contract must be supported by consideration. In a contract where the parties exchange promises of performance, if either of those promises is illusory or unenforceable, there is no consideration for the other promise. However, if one of the promises appears on its face to be so insubstantial as to impose no obligation at all on the promisor—who essentially says, “I will if I want to”—then that promise may be characterized as an ‘illusory’ promise. An illusory promise does not constitute consideration for the other promise, and thus the contract is unenforceable against either party. 

Fraud.  One who commits fraud themselves or participates in it may not recover damages for fraud-related causes of action (known as the doctrine of in pari delicto). Florida Rule of Civil Procedure 1.120(b) requires that in all claims of fraud or mistake, the specific circumstances constituting the fraud or mistake must be clearly stated.

Extrinsic fraud occurs when a defendant is somehow prevented from participating in a case. In contrast, intrinsic fraud applies to fraudulent conduct that arises within a proceeding and pertains to the issues in the case that have been tried or could have been tried.

Historically, extrinsic fraud, also known as “Fraud on the Court,” has been limited in its application to ensure the finality of judgments and avoid frequent challenges to final judgments. Even if the party challenging the contract can prove the more favorable version of fraud, the evidence of overreaching, fraud, coercion, or deceit must be clear and convincing.

If such fraud is successfully proven, the contract is void, and no part of it can be revived.

Illegality.  Florida courts presume that all contracts are valid, and if any illegality exists, it must be explicitly stated and proven. In any legal action where it’s necessary or attempted to demonstrate an unlawful contract, the courts won’t enforce it or the rights directly derived from it, even after the contract has been executed.

Laches. The defense of laches is valid when the plaintiff’s excessive delay causes the defendant undue harm. To claim laches, the defendant must prove the following: (1) the defendant’s conduct that created the situation for the plaintiff’s complaint; (2) the plaintiff’s failure to assert their rights by filing suit despite knowing or being aware of the defendant’s conduct; (3) the defendant’s lack of knowledge that the plaintiff would assert the right they are based on; and (4) that granting relief to the plaintiff would result in injury or prejudice to the defendant. Generally, laches does not apply until the statute of limitations expires. However, there is an exception when the circumstances warrant it, such as when an unreasonable delay causes prejudice to the party seeking to enforce a debt or other obligation.

License. This defense applies when the defendant was given legal authority to perform a specific act, and the acts complained of in the complaint were performed in accordance with that authorization.

Payment. Payment must be pled as an affirmative defense.

Release. A release or waiver can lead to the plaintiff’s relinquishment of the right to bring a claim against the defendant. This defense must be raised in the defendant’s answer to the complaint. If the circumstances allow, one could argue for a waiver based on an express “assumption of the risk.”

“It’s common law that the execution of a valid release terminates the claim. A release ‘conclusively resolves all claims’ covered by it. A ‘general release’ encompasses all claims that have matured at the time of its execution. When determining what rights are covered by a release, courts must consider the parties’ intent, as expressed in the document itself. As is the case with contracts generally, ‘the language used in [a] release is the best evidence of the parties’ intent.’”

Res judicata.  Res judicata would prevent this claim if this same cause of action has already been litigated between the plaintiff and defendant in a manner that renders the initial judgment conclusive on all matters that could have been adjudicated in the first action.

Statute of frauds.  Florida’s statute of frauds, codified at Fla. Stat. § 725.01, mandates that certain agreements, including those not to be performed within a year, conveyances of real property, promises to pay another’s debt, and prenuptial agreements, be in writing to be enforceable. Notably, the statute also requires that contracts for the sale of goods exceeding $500 must be in writing to be enforceable.  

Waiver. A waiver is typically an intentional surrender of a known right or privilege. When a waiver is inferred from behavior, “the actions, conduct, or circumstances used to demonstrate waiver must clearly establish a case.” For instance, “waiver does not arise from temporary abstention.”

To establish a valid waiver, the following elements must be met: (1) the presence at the time of the waiver of a right, privilege, advantage, or benefit that can be waived; (2) the actual or constructive knowledge of that right, privilege, advantage, or benefit; and (3) an intention to relinquish that right, privilege, advantage, or benefit. 

Commercial frustration doctrine. Under the commercial frustration doctrine, Florida courts have occasionally granted relief from contractual obligations when the parties couldn’t fulfill their contractual obligations due to unforeseen events. However, this doctrine doesn’t apply when the intervening event was reasonably foreseeable and could have been controlled by the contract’s provisions. Even when broader interpretations of the doctrine are considered, the defense against commercial frustration isn’t available for difficulties that could have been reasonably foreseen by the promisor at the contract’s creation. Additionally, the doctrine doesn’t excuse performance that’s not impossible but merely inconvenient, profitless, and expensive.

Impossibility of performance or frustration of purpose. Like the commercial frustration doctrine, the doctrine of impossibility of performance should be used judiciously if the relevant business risk was foreseeable at the agreement’s inception and could have been addressed through an express contractual agreement. Generally, a contract remains valid and the obligor is not excused from its obligations simply because the contract proves challenging or burdensome to fulfill.

Plaintiff’s breach of implied covenant of good faith and fair dealing Florida contract law recognizes the implied covenant of good faith and fair dealing, which applies to every contract. This covenant obligates each party to act in a manner that respects the other party’s rights and interests, ensuring that the contract is fulfilled as intended. In essence, it aims to safeguard the reasonable expectations of both parties involved. Good faith performance or enforcement of a contract involves demonstrating faithfulness to the agreed-upon common purpose and aligning actions with the justified expectations of the other party.

Unconscionability. Under Florida law, to invalidate a contract or a term in a contract for unconscionability, a court must find that the contract is both procedurally and substantively unconscionable. Procedural unconscionability involves examining the manner in which the contract was entered into and considering factors such as whether the complaining party had a meaningful choice at the time. Courts evaluate whether the complaining party had a realistic opportunity to bargain regarding the contract terms or if they were presented on a ‘take-it-or-leave-it’ basis. Additionally, they assess whether the complaining party had a reasonable opportunity to understand the terms of the contract. Substantive unconscionability requires an assessment of whether the contract terms are so ‘outrageously unfair’ as to ‘shock the judicial conscience.’ A substantively unconscionable contract is one that no reasonable person would make or accept under any circumstances. If a contract is both procedurally and substantively unconscionable, it should not be enforced.

Ratification. “Ratification is an act that conveys an intention, accompanied by complete awareness of one’s rights, to affirm and accept the benefits of a contract while simultaneously waiving the right to revoke it and seek appropriate compensation.” In the absence of a contractual relationship with an agent or the ratification of the agent’s actions, a principal cannot be held accountable for the agent’s negligence or breach of an oral contract.

Mirror image rule may prevent the creation of a valid contract. For the offeree’s acceptance to form a valid contract, there must be an objective manifestation of mutual assent. In all cases except the sale of goods between merchants, this objective manifestation of mutual assent requires that the acceptance be an exact mirror image of the offer, or more precisely, that the offer and acceptance perfectly mirror each other in every aspect. However, when it comes to the sale of goods between merchants, the Florida Uniform Commercial Code (UCC) applies, and it deviates from the mirror image rule. Instead, under the UCC, a “definite and seasonable expression of acceptance” or a written confirmation sent within a reasonable timeframe is considered an acceptance, even if it includes additional or different terms than those offered or agreed upon. This provision is often referred to as a “merchant’s ‘battle of the forms’” by some commentators.

Mistake. Mistakes can provide relief in rare cases, but only if they’re the right kind. Some courts have recognized that mistakes can be used to rescind contracts like releases. For example, if a release was executed without the plaintiff knowing they had sustained an injury or if they didn’t know about a specific injury, the release can be set aside. However, a mistake alone isn’t enough. The mistake must be based on a material fact that both parties assumed. For instance, a release of a personal injury claim can’t be set aside based on a mistake of fact if the plaintiff’s known injury turns out to be more serious than the parties anticipated when the release was executed.

Contract mistakes are treated differently depending on whether they’re “mutual” (both parties made the mistake) or “unilateral” (only one party made the mistake).

Mutual mistake. “A mutual mistake occurs when both parties agree on a particular matter, but due to an error or oversight in the written document, they express something different. In Florida, a court has the authority to modify a written document when, due to a mutual mistake, the document does not accurately reflect the parties’ true intentions or agreement. If the mistake is mutual and the circumstances prevent the parties from returning to their original agreement, rescission or cancellation may not be necessary. However, other equitable remedies may be appropriate to address the situation.”.

Unilateral mistake.  Florida law may grant rescission and other equitable relief upon a contractual unilateral mistake. However, it prohibits equitable relief in cases where the mistake stems from negligence or when the other party has already relied on the payment, making it inequitable to demand repayment.

Repudiation. A plaintiff’s repudiation of the contract provides a defense to, or excuse for, the defendant’s failure to perform. 

Alleged contract at issue may have been merely an agreement to enter into a later contract. The rule that it is possible for parties to make an enforceable contract binding them to prepare and execute a subsequent agreement is well recognized.

Top Ormond Beach Breach of Contract AttorneyContract disputes can happen in various situations, like real estate and business cases. If you’re facing a contract dispute, don’t hesitate to reach out to Ormond Beach contract litigation lawyer Andrew J. Pascale at 877-667-1211. Remember, this blog isn’t legal advice, but it can give you an idea of what to expect