What is a Contract Dispute?
Contract disputes occur when one or both parties to an agreement disagree about the terms and conditions. A contract is only valid when both parties fully understand the agreement and are willing to accept its terms. If the agreement is not mutual, it may be challenged in court.
What is a Contract Breach?
Contract disputes usually occur when a party breaches the contract, which means they do not do what they have promised to do in the agreement.
A breach may occur not only when the terms of the contract are not performed at all, but also when they are not done in accordance with the specifications indicated and/or when they are not completed on time.
There are 2 types of Contract Breaches:
- A material breach – in which one party does not perform his or her duty and, as a result, the contract is irreparable. The party affected by this breach can sue the party who has breached the contract for damages.
- A minor breach – also called an immaterial breach, in which the core of the contract is not changed. Both parties still must fulfil the contract when a minor breach occurs, but the party who has not breached the agreement can still sue the other party for damages.
In the case of a contract breach, one or both parties may sue for damages and/or to have the terms of the contract legally enforced. Ideally, disputes can be resolved in mediation before a lawsuit is filed. Binding arbitration is another form of alternative dispute resolution.
This can include:
- Compensatory damages designed to restore the injured party to the position he or she was in prior to the breach.
Punitive damages beyond full compensation for wrongful acts.
Nominal damages when a breach has occurred without measurable financial loss.
Liquidated damages, which are those specifically indicated in a provision of the contract.
5 types of Contract Disputes
- Breach of Contract – Disputes often arise out of contracts because they are incomplete or unclear. Each party interprets the language differently, usually for their own benefit, resulting in one party failing to honour their end of the agreement.
- Partnership Disputes – These disputes occur when the partners disagree as to what is in the best interest of their business. Arguments over financial compensation or leadership roles can quickly lead to a dispute.
- Business to Business Disagreements – If one business perceives another business’ actions as being unfair or deceptive within the free market, litigation can arise.
- Covenants Not to Compete – A business can ask their employees to sign non-compete agreements, which bind the employee not to engage in similar business practices for a set period of time in a specific location. On occasion, these agreements can be overly broad and unenforceable, which is why they need to be drafted carefully.
- General Liability – If you own property with pedestrian traffic, there’s the chance that someone will slip and fall and injure themselves. If this happens, you can be held accountable. Any injuries that occur on a business property have the potential to result in a legal dispute.
Remedies for Contract Disputes
Contract disputes are typically resolved by either equitable or legal remedies. The latter is usually in the form of financial damages awarded to the claimant for his or her loss. With equitable remedies, the parties take action to correct the dispute.
Common remedies for contract breach include:
- Cancellation and restitution
- Specific performance
What are the most common breach of contract remedies?
Avoiding Contract Disputes
When both parties are clear on the terms of a contract, disputes are less likely to occur. Take the following steps when entering a contract to prevent future disagreements:
- Document all contract negotiations in writing throughout the process, including offer history, quantities, prices, and all other terms and conditions.
- Be clear on the contract goal and be able to clearly state points of negotiation.
- Double-check terms and conditions each time a contract update is made and take special care when working with a new negotiator or changed product specs.
- Clarify the definitions of industry terms, legal words, and other jargon to prevent misunderstanding.
- Work with an experienced Solicitor who can assist with the negotiation process.
If you need help with contract disputes, get in touch with one of our expert Solicitors today on 0121 820 0112.