A contract is an agreement between two or more parties that creates legally enforceable mutual obligations. When one party does not hold up their end of the bargain, the non-breaching party has the right to seek damages under a breach of contract suit.
While breach of contract actions seek monetary damages, sometimes the plaintiff seeks an equitable remedy rather than a financial one. But if the plaintiff takes too long to file their lawsuit, a defendant may be able to assert an equitable defense known as laches.
What Does a Laches Defense Accomplish?
Laches is an equitable defense that a party can assert when a non-breaching party takes an unreasonably long amount of time to file a suit for relief. As a result, the breaching party suffers some type of harm or prejudice (usually economic or legal).
To prevent this from happening, the breaching party seeks to prevent the plaintiff from filing the lawsuit, known in legal terms as estoppel by laches. It is important to note that this defense is only available if the plaintiff is seeking an equitable remedy, such as specific performance, restitution, or an injunction.
How Do I Prove Laches to Defend a Breach of Contract Claim?
There are two basic elements to an estoppel by laches defense:
- The plaintiff unreasonably delayed seeking the breach of contract suit in court, and;
- That delay caused prejudice or a harm to the defendant due to that delay.
One of the most common uses of laches is when a plaintiff delays filing to avoid dealing with witnesses that may hurt their recovery. For example, if a key witness is sick or elderly, then the plaintiff may try to wait until the person passes to begin legal procedures.
If the removal of this witness severely limits the breaching party’s defense potential or causes significant economic harm, then they can use a laches defense to limit the harm.
What Claims Can a Defendant Use Laches For?
As stated above, a laches defense is only applicable when a plaintiff seeks an equitable remedy as opposed to monetary relief. There are three types of claims that a laches defense usually apply to: specific performance, contract rescission, and contract reformation.
Specific performance requires the breaching party to fulfill their obligations as laid out in the contract, such as delivering a good/item or rendering the agreed upon payment. If a delay would inhibit the breaching party’s ability to mount a proper defense that would have been available, then a judge may use laches to stop such performance.
With recission, the plaintiff is looking to eliminate the old contract entirely and have a new one drawn up. Sometimes the contract and relationship is too important to toss out entirely and drawing up new terms on the same subject matters serves both parties positively.
If a plaintiff uses unnecessary delay, then they are usually looking to create friendlier terms for themselves and give up less than they did in the original contract. Recission stands in contrast to reformation, where the original contract is rewritten to provide clarification, correct mistakes, and add in terms that were agreed upon after it was signed. Once again, the non-breaching party may use delays to get themselves a much better deal than the original.
Does Laches Change or Eliminate a Statute of Limitations?
A statute of limitations is the legal term for the time period that a potential plaintiff has to file a lawsuit, or be barred from doing so. Most states have a three or four year statute of limitations for contract claims, with the potential to extend it up to 15 years depending on certain circumstances. The goals of these time limitations are not only to avoid clogging up civil court systems, but to ensure that a potential lawsuit does not follow someone around for the rest of their lives.
Laches deals with time as well, but of course does not have a set in stone deadline like a statute of limitation does. Instead, the focus is on what prejudice and harm someone suffers as a result of a delay, and is much more case and fact specific.
That does not mean that the two are completely separate from one another. A court may use the state’s statute of limitations in determining if a delay causes harm or prejudice, and this deadline can still prevent a plaintiff from seeking relief even when the breaching party is not harmed by said delay.
Do I Need an Attorney for Contract Breach Issues?
Legal issues surrounding contract formation, enforcement, and failures can have a huge economic impact on all parties involved. This is why seeking the help of an experienced contract attorney in your state is so important. They can advise you of your rights, represent your interests in negotiations and settlements, and be your advocate throughout a trial or any other legal proceeding.