QUESTION: Can you breach a contract (for example, stop paying or performing under a contract) if the other side breaches the contract first?
ANSWER: Under Colorado law, a party may establish justification for nonperformance under a contract (like not paying any more money or not performing any more services) if it can demonstrate that the other party to the contract caused its nonperformance thru a prior and proceeding material breach of the contract.
As one Court has explained: “One party’s failure to perform under a contract precludes that party’s demand for performance by the other party.” Hemmann Mgmt. Servs. v. Mediacell, Inc., 176 P.3d 856, 859 (Colo. App. 2007).
Stated another way,
“if a promisor is himself the cause of the failure of performance of a condition upon which his own liability depends, he cannot take advantage of that failure.” Reid v. Pyle, 51 P.3d 1064, 1067 (Colo.App.2002). See also Kaiser v. Mkt. Square Disc. Liquors, Inc.,992 P.2d 636, 640–41 (Colo.App.1999) (a material breach by a party deprives that party of the right to demand performance by the other).
Although each contract is different, a material breach of contract by the other party may give you the right to stop performing, repudiate the contract and/or sue for breach of contract. However, a decision regarding if, when and how to stop performing under any contract is a serious question which would not be taken lightly given the potential costly repercussions that may arise as a result. If the decision is made prematurely, you could open yourself up to a breach of contact claim being asserted against you. It the decision is made too late, you could expose yourself to additional and potentially avoidable damages caused by another’s breach of contract.
Before deciding what to do, it is oftentimes helpful to discuss your dispute with an experienced breach of contract attorney who can help you access your options and develop a comprehensive strategy for attempting to confront another parties prior and proceeding breach of contract in the most advantageous way possible to both help limit your damages from their breach of contract and maximize your ability to legally recover your damages from their breach of contract.
At Hansen Law Firm we have been helping clients negotiate such turbulent waters for over 30 years. We can help you decide how best to react to another parties’ breach of contract and help put you in the best position possible to correct your ship!