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Party A sues Party B in court for $10,000 due to breach of contract. Party B denies the claim and holds that Party A owes them $5,000 due to breach of the same contract.

Can Party B counter sue Party A during the same court case or is Party B required to file a separate lawsuit against Party A for the counter suit?

Assuming not, would it matter if Party B agrees that it owes Party A $10,000 but because of the breach by Party A (of a different provision of the contract) it holds that the amount should be reduced by $5,000?

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    This asks what the law permits in the way of procedure. It is not a request for specific legal advice as this site defines an RSLA, and should not be closed on that basis.
    – David Siegel
    Commented Jan 13, 2023 at 1:45

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Can Party B counter sue Party A during the same court case or is Party B required to file a separate lawsuit against Party A for the counter suit?

Party B should countersue. In fact, filing a separate suit is most likely to get consolidated with the court proceedings that party A initiated via his complaint.

would it if Party B agrees that it owes Party A $10,000 but because of the breach by Party A (of a different provision of the contract) it holds that the amount should be reduced by $5,000?

Yes, it would matter. This tells the court that it only needs to decide B's claim, since A's claim is undisputed.

If B has lawful reasons for disputing A's claim, it is in B's best interests not to concede liability. By contrast, if the court considers B's position vexatious, B is at risk of sanctions on B and/or being ordered to compensate A for more than the damages from B's breach of contract.

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  • Party B should countersue. Does this mean that if they don't counter sue and just raise it as a defense as to why they don't owe the full $10,000, the judge will ignore the argument (even if it has merit)?
    – S.O.S
    Commented Jan 13, 2023 at 4:57
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    @S.O.S "if they don't counter sue and just raise it as a defense". Raising it as defense or mitigating factor would be futile because, as you mention, B's argument pertains to "a different provision of the contract" rather than to the provision on which A's claim is premised.
    – Iñaki Viggers
    Commented Jan 13, 2023 at 12:26
  • "In fact, filing a separate suit is most likely to get consolidated with the court proceedings that party A initiated via his complaint." This would be lenient. Usually, a claim not brought as a counterclaim is waived entirely.
    – ohwilleke
    Commented Jan 13, 2023 at 17:54
  • @ohwilleke "Usually, a claim not brought as a counterclaim is waived entirely." Courts that do so contravene a principle of equity. Devlin v. Transportation Communications Intern., 175 F.3d 121, 130 (1999) reflects that courts should ponder "both equity and judicial economy" when deciding whether to consolidate cases ("efficiency cannot be permitted to prevail at the expense of justice"). In the OP's scenario, the matter does not even "involv[e] a common question of law or fact", Id, but a different provision of the contract.
    – Iñaki Viggers
    Commented Jan 13, 2023 at 20:48
  • @IñakiViggers Many courts would do so anyway, viewing any question arising out of the same contract as a common question of law and fact (e.g. the validity of the contract). Res judicata bars further litigation if there is a final judgment in a case in which a matter was or could have been litigated. So, whichever comes to judgment first could bar litigation of the issues in the other.
    – ohwilleke
    Commented Jan 13, 2023 at 20:51

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