Key takeaway

A robust defence requires early analysis of the claimant’s legal and evidential position, a thorough review of the contractual framework, including the boilerplate provisions that are the battleground in commercial litigation, and an assessment of the statutory and common law defences available.

Identifying the Court

The claim documents will specify the court in which proceedings have been issued. High-value commercial disputes are typically litigated in the Commercial Court; construction and technology disputes in the Technology and Construction Court (TCC); lower-value claims in the County Court. Where the contract contains an arbitration clause, the defendant should apply promptly for a stay of proceedings under section 9 of the Arbitration Act 1996, the court must grant a stay unless the arbitration agreement is null and void, inoperative or incapable of being performed.

Responding Within the Required Timeframe

The Civil Procedure Rules set strict deadlines. A defendant has 14 days to file a Defence once the claim is served, extended to 28 days if an Acknowledgment of Service is filed first. Given how quickly these deadlines arrive, instructing specialist litigation solicitors immediately upon receipt of the claim is essential.

Building a Robust Defence

The Defence must systematically address each allegation in the Particulars of Claim, setting out the contractual and legal basis for each position taken. Particular attention should be paid to the contract’s boilerplate provisions.

Limitation and exclusion clauses are frequently relied upon in defence. English courts will generally uphold such clauses between commercial parties, subject to the reasonableness test under the Unfair Contract Terms Act 1977. Following the Court of Appeal’s decision in Last Bus Ltd v Dawson Group [2023], courts have signalled a more robust approach to scrutinising wide exclusions, making clear that equal bargaining power alone is not sufficient to render an exclusion clause reasonable.

Force majeure clauses may excuse performance where specified events beyond a party’s control prevent or hinder performance. The term has no standard meaning in English law; its effect depends entirely on the contractual wording. Critically, increased cost or reduced profitability will not generally suffice (Thames Valley Power v Total Gas & Power [2005]). Compliance with any notification requirements is essential, as failure to notify can constitute a condition precedent precluding reliance on the clause.

Termination provisions should be carefully reviewed to confirm that any termination was validly exercised. Wrongful termination can itself amount to a repudiatory breach, exposing the terminating party to a counterclaim.

Key Defences

The defences available will depend on the facts and the contractual relationship. The most commonly relied upon include:

Validity of the contract: A contract that lacks offer, acceptance, consideration or intention to create legal relations is void. Absence of authority, uncertainty of terms or non-compliance with formality requirements may also be raised.

Misrepresentation: Where the defendant was induced to contract by a false pre-contractual statement, the contract may be voidable and damages available under the Misrepresentation Act 1967.

Prior breach by the claimant: A repudiatory breach by the claimant may discharge the defendant from its own obligations. Whether a breach justifies termination depends on whether it goes to the root of the contract.

Frustration: Where a supervening event renders performance impossible or radically different from what was agreed, the contract may be frustrated. The courts apply this doctrine narrowly, as confirmed in Canary Wharf (BP4) T1 Ltd v European Medicines Agency[2019] and events that merely increase the cost or burden of performance will not suffice.

Illegality: Contracts that are illegal at formation or in performance will not be enforced. Following Patel v Mirza [2016] UKSC42, the court balances a range of factors including whether enforcement would undermine the integrity of the legal system.

Limitation: Claims must generally be brought within six years of the breach (twelve years for contracts executed as a deed). A limitation defence, if available, must be pleaded.

Quantum: Losses must be caused by the breach, not too remote (Hadley v Baxendale [1854]) and properly mitigated. Claimants frequently include heads of loss that are not properly recoverable, and forensic scrutiny of the quantum claim often yields significant reductions.

Counterclaims and Alternative Dispute Resolution

Defendants should consider at an early stage whether they have any counterclaims arising from the same transaction. A well-founded counterclaim can transform the balance of the litigation and strengthen the defendant’s position in settlement negotiations.

Litigation is not always the best route to resolution. The courts actively encourage ADR, and unreasonable refusal to mediate can attract adverse costs consequences. Mediation, expert determination or arbitration may offer a faster, more cost-effective and confidential outcome.

Immediate Steps

On receipt of a claim, defendants should: file the Acknowledgment of Service; instruct specialist litigation solicitors without delay; implement a litigation hold to preserve all relevant documents; review the full contractual framework; notify any relevant insurer; and assess whether any counterclaim should be advanced.

Commercial litigation is a fast moving area of law with recent cases impacting how the courts will interpret factors such as contractual time limits and oral and informal agreements. This article is not a substitute for formal legal advice, which will vary according to your specific circumstances.

Barnes Law has a proven track record in successfully representing clients in breach of contract litigation. If you have been served with a claim, contact Barnes Law’s London-based litigation lawyers and barristers for strategic advice and representation.