Legal Definitions - compulsory-counterclaim rule

Compulsory-Counterclaim Rule

This rule dictates that if you are being sued (the "defending party") and you have a claim against the person suing you (the "plaintiff") that arises from the exact same event or set of circumstances as their original lawsuit, you are legally required to bring your claim in that same lawsuit. If you fail to do so, you generally lose the right to ever bring that claim in a separate case later on.

Here are some examples:

• Example 1: Car Accident Dispute

  Imagine Sarah sues David for damages to her car, claiming David ran a red light and caused an accident. David, however, believes Sarah was actually speeding and caused the collision, resulting in damage to his own vehicle and personal injury. Under the compulsory-counterclaim rule, David must bring his claim against Sarah for his damages and injuries within Sarah's lawsuit. If David decides not to file his counterclaim in that case, he would likely be prevented from suing Sarah for his damages in a separate lawsuit later, as both claims stem from the same car accident.

• Example 2: Construction Contract Dispute

  A homeowner, Mr. Henderson, sues a contractor, Build-It-Right Inc., alleging that the new deck they built was structurally unsound and not up to code. Build-It-Right Inc., in turn, believes that Mr. Henderson still owes them a significant portion of the agreed-upon payment for the deck construction. Because both claims—the homeowner's claim about faulty work and the contractor's claim for unpaid fees—originate from the same construction contract and project, Build-It-Right Inc. would be required to file its claim for unpaid fees as a counterclaim within Mr. Henderson's lawsuit. Failing to do so would likely mean they forfeit their right to collect those unpaid fees later.

• Example 3: Business Transaction Gone Wrong

  A clothing supplier, "Fashion Forward," sues a boutique owner, Ms. Chen, for failing to pay for a large shipment of dresses. Ms. Chen, however, contends that the dresses were delivered late, were not the quality promised, and caused her to lose significant sales during a key holiday season. Ms. Chen's claim for lost profits due to the late and defective shipment arises directly from the same transaction—the sale and delivery of the dresses—that Fashion Forward's lawsuit is based on. Therefore, Ms. Chen would be compelled to bring her claim for lost profits as a counterclaim in Fashion Forward's lawsuit, rather than attempting to sue them separately later.