A defendant faced with a breach of contract claim in New York has a few different defenses available to them. Here, we will address certain defenses specifically as they relate to contract formation, performance, damages, and procedural defenses.
Contract Formation
Ambiguity
A defendant can assert ambiguity as a defense to the formation of a contract where the contractual provision in question is ambiguous and the defendant believes his interpretation is correct. A contract term is ambiguous if it lacks a precise meaning, can be interpreted to mean more than one thing, or provides a reasonable basis for a difference of opinion.
Duress
Next, a defendant may also assert duress as a defense where the plaintiff made wrongful threats to the defendant, the threats coerced the defendant to agree to contract terms, the defendant promptly repudiated or did not otherwise ratify the contract, the defendant had no other reasonable alternative but to accept the contract terms, and ordinary breach remedies are inadequate to protect the defendant.
Mistake
Mistake is another defense a defendant may assert, which can be mutual or unilateral. A mutual mistake occurs when both parties had erroneous beliefs at the time of contracting that certain material facts were true, the mistake existed when the contract was entered into, and it was so substantial that it goes to the heart of the parties’ agreement. A unilateral mistake occurs when the defendant alone had an erroneous belief of certain material facts at the time of contracting, the defendant’s consent to the contract was induced by fraud or some other wrongdoing, and the mistake was not caused by the defendant’s own negligence, it existed when the parties entered into the agreement, and was so substantial that it goes to the heart of the agreement.
Contract Performance
Accord and Satisfaction
A defendant can assert accord and satisfaction where there is a genuine dispute concerning the defendant’s obligations, the plaintiff agreed to accept from the defendant something different than the original obligations, and the plaintiff accepted the new agreement by express or implied conduct.
Relinquishment of Known Contractual Right
Also, a defendant may defend against a breach of contract action where the plaintiff intentionally and voluntarily relinquished a known contractual right, in other words, waived his right under a contract, and that but for the waiver, the contractual right would have been enforceable.
Damages Defenses
Duplicative Damages
A defendant may be able to assert a challenge to the damages award sought by plaintiff if the damages are duplicative of those sought for another claim, such are where tort claims seek the same damages as those for breach of contract claims.
Double Recovery
Also, a defendant may be able to challenge the damages sought by plaintiff if the award would result in double recovery for the same loss or the damages are superseded by a liquidated damages clause in the contract.
Plaintiff's Duty to Mitigate Damages
Additionally, a plaintiff has a duty to mitigate damages and a failure to do so may give defendant a viable defense. Specifically, the defense is available if plaintiff failed to mitigate damages where the plaintiff did not take reasonably necessary and available steps to minimize injury and reduce its damages, and the contract, a statute, or case law does not eliminate the duty to mitigate.
Procedural Defenses
Statute of Limitations
Defendant may assert the statute of limitations if plaintiff failed to timely commence the action. In New York, a plaintiff must commence an action within six years of the alleged breach or within six years after accrual of any alleged quasi-contract claims, such as promissory estoppel or unjust enrichment.
Lack of Standing
Finally, if plaintiff does not have standing to commence the action in the first place, which can be asserted by defendant as a defense to the action. A plaintiff may not have standing where, for example, he is not a party to the contract which has allegedly been breached, the plaintiff is not the real party in interest because it transferred or assigned its rights under the contract to another party, or the plaintiff sued in his individual capacity despite the contract divesting rights only in a partnership held by plaintiff.
Conclusion
As a practical matter, before asserting any defenses, defendants should review their contract to determine whether there are any limitations in the contract itself. For example, contracts may have loss allocation provisions, no-action clauses, or other limitations that limit certain rights and remedies. This is why it is important to retain competent counsel to assist with preliminary contract review before asserting defenses to breach of contract claims. KI Legal’s experienced litigation attorneys are ready and able to help guide you through every step of this process. If you have questions about breach of contract defenses, or need help with your particular commercial dispute matter, KI Legal’s knowledgeable litigation attorneys are here to help. Schedule a free consultation by calling (212) 404-8644 or emailing info@kilegal.com.
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