Contract Disputes: A Lawyer’s View

What Is a Contract Dispute?

Understanding the Nature of a Contract Dispute
A contract is an enforceable agreement between two or more parties, generally consisting of an offer, acceptance, and a promise. Every contract has its terms & conditions, and most will contain a number of clauses as well. These clauses can be purposefully added to make the terms of the contract as clear as possible, or they can be included as an oversight on the part of the drafter. Understanding what constitutes a contract and knowing what can constitute a breach of contract are vital to properly interpreting and executing the terms of a contract successfully.
Even small disagreements in contract negotiations or execution can lead to larger problems, disputes, and on occasion can even shut down entire projects on which completion of contract fulfillment depends. Disputes may arise which can result in substantial loss to one or both parties, and this is where contract disputes and disputes litigation come into play.
Contract disputes include anything from simple disagreements or miscommunications about wording in an agreement or failure to meet a timeline to misunderstood responsibilities or a fundamental lack of agreement about the actions that need to be taken by each party. Disagreements can also occur over the terms of an agreement, whether or not a breach has occurred, who can take corrective action, how damage should be compensated, or if anything is owed at all. Because the contract itself is essentially the agreement between the two parties as legally structured, contract disputes often end up being disagreements about interpretation of the contract , making clear contract language and understanding of the intended outcome imperative to successfully navigating contract execution.
Contract disputes most often arise during fulfillment of contract obligations when one party fails to adequately meet its obligations under what was agreed upon in the contract’s terms.
Common causes of a contract dispute include:
Many parties rapidly discover that their agreements have not covered the scenarios that come into play as the contract is being fulfilled, creating tension and often leading to what often appears to be a disagreement about semantic meaning. If one party believes that the contract has been breached or is about to be breached, there is often a rush to resolve the situation through legal means before it degenerates further. The problem is that sometimes the disagreement between the parties is based on their understanding (or misunderstanding) of the terms of the agreement – which can actually be ambiguous or even contradictory due to inadequate contract terms – leading to a spiral into a full-blown dispute.
In the construction industry, contract disputes are unfortunately common and can be the source of millions of dollars in loss for project owners. One particularly well-publicized contract dispute case involved construction of the Chicago O’Hare Airport expansion by Bovis Lend Lease (previously Tishman Construction), who sued field partner Limak Insaat (LILMAK) following LILMAK’s failure to meet deadlines, causing delays in the final project completion of the airport expansion over one year later than involved parties had originally intended – costing taxpayers on the order of $65 million in delays caused by construction penalties and interests. In this case, LILMAK was awarded only $3.1 million of the $22 million it sued for – proving that even award of contracts and contract disputes can be incredibly complex and costly. A contract dispute like this may lead to arbitration, litigation, or even settlement…depending on the circumstances of the case and the actions undertaken by the parties involved.

What Does Contract Disputes Lawyer Do?

In the case of a contract dispute, a contract disputes lawyer can be a tremendous asset to individuals, businesses and other entities. A contract disputes lawyer is tasked with representing clients in contract litigation matters, such as breach of contract, fraud and various types of commercial disputes. Contract disputes lawyers are highly trained in contract law and have a thorough understanding of contracts in their entirety — not only the specific terms that may be in question at any given time. They are responsible for knowing all of the statutes, regulations, policies, procedures and other applicable rules and laws throughout the litigation process. This allows them to accurately assess the situation of their client and effectively prepare for both trial and settlement negotiations. Contract disputes lawyers have years of experience handling these complicated cases, giving them insight into how to best minimize losses for their clients, whatever the case may entail. This experience enables them to advise their clients on the best ways to bring the case to a resolution and can be a source of peace for clients who dread the idea of dealing with a lengthy trial process. The approach chosen will depend on the specific circumstances of the case, as well as the preferences of the client. If a pre-litigation settlement is not the answer, a contract dispute lawyer can assist in conducting negotiations and preparing for trial. And, if no resolution can be reached and trial is necessary, an experienced contract disputes lawyer is vital to ensuring the success of the case. Whether or not you are familiar with the legal process in a contract dispute matter, an experienced contract disputes lawyer can help you prepare every step of the way, from drafting and reviewing contracts to assessing the merits of a lawsuit and providing a strong, effective presentation of evidence and supporting argument at trial.

Types of Contract Disputes

Contract disputes can arise in various forms and be the root of costly, time-consuming litigation. As such, staying abreast of the types of common disputes and what remedies are available is essential to both drafting contracts and understanding your options in the event of a breach.
A "breach of contract" occurs when one party does not perform according to the terms of the contract. "Breach" can be broken down further into three additional categories: Breaching a contract does not automatically end any contractual agreements. In fact, the breaching party must be afforded an opportunity to cure (i.e., remedy) the breach. In some cases (i.e., when the contract is substantially performed), "time is of the essence" may or may not apply, but if it does, the contract will have to be performed as promised, and then the breaching party may be able to bring a lawsuit against the breaching party for loss of profit. To put this into contextual industry examples, if a material supplier for a new construction project fails to institute timely delivery for tile, the construction company may be left scrambling to find a similar tile for its new client. While the original tile may be out, if the builder finds one of equal value and rarity, they may not be entitled to a remedy for the original tile contract because the builder was able to obtain the product elsewhere. Conversely, if the builder’s schedule is impacted due to the supplier’s failure to deliver the tiles on time, the builder’s damages could lead to a bigger dispute for the builder filing a lawsuit against the supplier for consequential damages. Contract disputes also commonly occur when one party contends that another has breached the agreement and is therefore seeking to enforce the terms of the contract. In this case, courts will analyze the terms of the contract and, oftentimes, attempt to reconcile the contract and remedy the breach through monetary or equitable relief. Construction projects often lead to disputes over contract terms, particularly when contracts are written not to include certain terms. For example, a general contractor may be seeking damages for sub-contractors who fail to follow his or her specifications in plans and drawings. This could lead a court to find that those specifications are not binding where a catalogue, brochure, or website description was provided (or used) as part of the final contract. Another example is the use of "custom finish" for an entire home rather than line-item specifications. Because the home’s contract included various specifications and finishes that were acceptable to the parties, a client cannot later pick and choose custom finish selections. Disputes over contract terms are also increasingly arising when one party enters into negotiations with intent to not complete the contract. Accordingly, courts will examine the negotiated contracts and how the parties performed under them after the contract was signed. This last element is critical in determining the dispute outcome because even where a contract lacks specific terms, performance of the contract can cause it to be binding. When a party accepts the benefits of a contract and continues to perform, it can be difficult to escape from the deal. Non-performance issues most commonly arise in the business-law field, and are further divided into subcategories that include a non-performance by a party, a third-party, or an agent/player (such as creditors, beneficiaries, assignees). Real-life examples of non-performance provisions or issues include: •Party 1 does not make a claim in a legal proceeding against Party 2, and Party 2 attempts to enforce the contract provision at issue. •Third parties may bring enforcement action when they are a "known creditor" and have been able to show that the party’s promise to pay the creditor the debt and promise to hold the creditor harmless under the contract is enforceable. •Again using negligence in the medical treatment context, a patient would have to be able to convince a court that the promise was binding despite the fact that the doctor did not intend to enter into a contract with the patient to treat them in a certain way and that promise was part of a wider chain of events that caused that party harm.

Resolving a Contract Dispute

The standard process for resolving a contract dispute is best represented by the American flag. You start in the middle and go both ways. First, there is negotiation, using calls or letters, sharing information or just talking it out, to try to reach a mutually satisfactory agreement with the other party. If that does not succeed, you can either go to arbitration, litigation, or mediation. You can even go to all three if you want. All of these, however, take time and more importantly, money. So, with few exceptions, the idea here is to try to resolve these contract disputes as quickly and as cheaply as you can.
In arbitration, you submit the contract dispute to a neutral third party, called the arbitrator, for resolution. Everyone involved must agree on the arbitrator before the process begins and, in most cases, the process is binding. That means that the decision will be upheld by a court and the parties can’t come back to litigate over the same claimed issue.
In litigation, you take your case to court and have a judge, or a jury, decide . You can litigate if there is no arbitration clause in the contract and one or both parties refuse to arbitrate the dispute. You can also litigate if the arbitration clause is deemed unenforceable by the court.
Mediation is a middle ground between litigation and arbitration. Like arbitration, the parties choose the mediator from a list of neutrals. Like litigation, however, the parties do not have to abide by the decision. The cost of mediation is usually far less than any other means of resolution and there is no formal discovery process. The idea is to work together to come to a solution that is satisfactory to everyone. The decision made by the mediator is not binding, although the failure to follow the decision could result in litigation.
To prepare, you should go into an arbitration session (or a court case for that matter) with a list of the facts and supporting documents that clearly explain why you are seeking what you are seeking. If you get it wrong, it could cost you a lot of money. If you are fighting over $50,000 it’s probably not worth spending $100,000 on litigation, unless there is a black eye issue.

Ways to Avoid Contract Disputes

The key to preventing contract disputes is in drafting clear contract terms and providing that each party has a roadmap from which to work. A client should know when the different elements of a contract are due or expected to occur and what happens if there is a default, e.g., if there is a default in payment you may be required to pay interest at the rate of X plus Y%, or if there is a delay in delivery you may be required to pay for any resulting damages.
The basis of many a contract is the "meeting of the minds." If the parties are not on the same page about what the agreement is supposed to do, then there will be a problem. The first step in contract formations is making sure that the parties are clear as to what is expected of them and that each party is accountable if something goes wrong. Parties should strive to provide that contracts are clear and unambiguous. Broadly worded clauses should be avoided, like "reasonable effort" or "best efforts." Ambiguities in contracts are interpreted against the drafter, as there is a presumption that the drafter knew the requirements and purposes of the clause.
The first step in preventing contract disputes is to draft clear contract terms and provisions. Examples include:
If you are a vendor, make sure that the contract states when the product(s) must be delivered, and the contract remains in force until all obligations are performed. Make sure that you have covered all bases. The parties need to attempt to think of all possible contingencies so that there are as few surprises as possible.
Communication is another essential element to preventing future disputes. Parties should attempt to hold regular meetings to see what is on the horizon and to note anything that may impact their contract obligations. Parties also need to ensure that they are communicating with each other and responding to emails and phone calls. Regular meetings can help to facilitate this. Many companies hold "contract meetings," where the parties involved in the contract all meet to discuss any upcoming obligations. Companies can also send out newsletters notifying personnel if anything is approaching (i.e., a delivery date or contract expiration date). Some companies send out calendar reminders to all involved. Keeping everyone up to date is essential to making sure that everyone is on the same page.
Regular contract reviews are also critical. Parties should have a process by which they review their contracts and obligations on a regular basis. This is especially true if the contracts are long-term, like construction contracts or contracts for labor and services. By making sure that none of the obligations in the contracts have been missed or defaulted upon and that they have all been performed, the parties can be on guard if a dispute is arising and can look at the contract in response to that dispute.

How to Choose a Contract Disputes Lawyer

Choosing a contract disputes lawyer can be daunting, especially if you have no prior experience dealing with a lawyer or a legal proceeding of any kind. It’s important to talk with several contract disputes lawyers before you make your decision, and some certainly will not be able to help with your specific case or issue.
Start by researching contract disputes lawyers in your area. Your potential lawyer should have successfully handled similar cases and have glowing reviews from former clients.
Once you’ve narrowed down your selection to two or three, meet them, review their credentials and determine if they will be able to handle your contract dispute. Also , ask the lawyer for a more detailed legal opinion about the contract issues at play. Many lawyers will conduct an initial no-charge interview, but you also should prepare a list of questions that will help you properly assess the lawyer.
Be sure to inquire if the lawyer has represented clients in the relevant court system, as well as with the American Arbitration Association. A confident lawyer will be ready and able to answer all of your questions.
If you’re not satisfied with the lawyer’s answers, then seek another lawyer. Most importantly, make sure that you trust the lawyer you ultimately choose, because you want this person at your side in the courtroom.