A contract is a legally binding document that gives each party rights and obligations. It is a set of mutual promises that each party must fulfill. Many contracts proceed without any legal issue, as both parties can realize the benefit of the bargain to which they agreed. In other cases, challenges in the performance of the agreement may lead to a dispute between the parties.
There are high stakes in any contract dispute. Either side may have to pay the other money or perform according to the contract’s terms (although the latter outcome is rarer). It is best to avoid handling a contract dispute on your own. Instead, you should contact an experienced contract dispute lawyer to represent you throughout the dispute process. They are legal professionals with knowledge of contract law, and they understand the complexities of contracts, including the terms, conditions, and obligations. The legal issues may begin well before one party takes the case to court, and your attorney will work to protect your legal rights.
Contract Interpretation
One of the most common reasons for a breach-of-contract lawsuit is that the two parties disagree over the actual meaning of the contract. They may both have different readings of the exact language of the agreement, which causes each to have varying understandings or expectations. In many cases, the contract’s language can be ambiguous, and there are two competing interpretations, each of which may be plausible.
The parties may need to go to court, where a judge will determine what the contract says. The preference is for the contract to have clear and concise language, allowing the judge to understand its meaning.
If there is any ambiguity, the judge will need to use principles of contract interpretation. A judge may consider things like:
- The course of dealing between the two parties
- The usage of trade in the industry
- The course of performance for this individual contract
- Any default rules
- Standards of reasonableness in the interpretation of the contract
A judge rarely allows the introduction of extrinsic evidence to decide contract disputes. They can only do so when the language is ambiguous and cannot reach a resolution by other means.
If one party has drafted the contract, the doctrine of contra proferentem may apply. The judge will interpret any ambiguity against the party that drafted the agreement as a principle of fundamental fairness. Therefore, you should ensure you properly draft the contract before either party signs it.
Performance Delays
The contract may impose a timetable for performance, and the party paying money may suffer damages because the non-performing party cannot meet the contract terms. The contract itself may impose damages for the failure to meet the timing of the contract. The party paying the money may engage in anticipatory repudiation of the contract when they believe that the other party is not performing in accordance with the terms of the contract.
The failure to perform may not be as cut and dry as it seems, and there may be a reason why the party failed to perform that relates to the other party’s actions. For example, in a construction contract, the buyer may not have made the property available in a timely and suitable manner to allow for construction.
Termination
The contract may give one party the right to terminate the contract for default when the other party does not perform according to the terms of the agreement. Termination is a drastic remedy, and neither party should take it lightly. It must result from a significant problem, such as providing deficient work, delivering a product, or working very late.
If a party terminates a contract, the other will suffer severe losses. They may have already purchased equipment and hired workers. Besides lost profits, there can be dire consequences for the non-terminating party.
Usually, the non-terminating party will always take legal action to claim that the termination was unjustified. They may blame the terminating party for failing to perform, claiming that the other side made it far more challenging to adhere to the contract. In other cases, the non-terminating party may argue that there was a valid excuse for their failure to perform.
If a party wins a lawsuit claiming wrongful termination, they can have the legal right to significant damages. Thus, the terminating party must be cautious before making this decision, as they are always taking a risk.
Changes
One party with an obligation to perform the contract may allege that the other party has asked them to do work not in the contract itself. They may claim that the other party requires them to go above and beyond what they have already promised, which may result in a loss of money.
The other party may argue that the terms of the contract cover the work.
Work can be a constructive change, even if the requesting party did not agree to a modification of the contract. The performing party must get paid for their extra work. In the meantime, the performing party may face financial difficulties before they receive payment because they must follow the directions from the other party.
Two parties to a contract may agree on a formal modification if work requirements change. However, there is often a dispute over whether instructions from one of the parties constitute an actual change or whether they are part of the actual contract. In some cases, a court may order one party to compensate the other because they went over and above the terms of the contract.
Misrepresentation of Fraud
Two parties need to have a meeting of the minds before they reach an agreement, and one party cannot make any misrepresentations to the other. If they have made an affirmative misstatement, it can be fraud. The same thing happens when a party has an obligation to disclose information to the other before any agreement. For example, the seller of real estate must disclose any latent defects to the other party that may not show up in an inspection.
If one party has been the victim of fraud, they may sue to try to rescind the contract. If they are successful, a judge can issue a ruling that makes it as if the parties did not agree to the contract in the first place.
You will need to meet a relatively high bar to prove fraud. Parties to a contract should act in good faith, and you need evidence that shows that they moved forward with intent. However, even if you cannot prove the fraud necessary to warrant a rescission, you may still qualify for monetary damages due to a misstatement or failure to disclose.
Refusal to Perform
A party may refuse to deliver what they have promised. For instance, they may have agreed to sell a home to the buyer but will not go through with the deal. In that case, you may seek specific performance of the agreement in which the judge will order the other party to deliver following the terms of the contract.
Judges do not often order specific performance, a rare legal remedy; they usually order the refusing party to pay monetary damages to the other.
Why You Need an Attorney for Any Contract
Every single word and comma in the contract matters, and it may be surprising to know that the entire meaning of the contract may vary because of a single comma. You may not know what you agreed to until a judge has interpreted the contract against you. Even what you think may be an airtight contract can be rife with ambiguities that can lead to disputes.
Contracts are complex documents filled with legal jargon that can be difficult for the average person to understand. A lawyer, however, is well-versed in the language of contracts and can explain the meaning of each section. They can also interpret and analyze the terms of the contract. They have the experience to identify potential loopholes or discrepancies in your favor, which can be especially important when dealing with contracts that have ambiguous or vague language.
Thus, it is best to have an experienced contracts attorney draft any agreement before you sign. If the other party has drafted the contract, you should have a lawyer review it before you sign. Your contracts attorney may suggest changes to the document to protect you and your legal rights. Once you sign a contract, the terms are binding, and you may suffer harsh consequences and losses once you sign it. Therefore, you should not sign any agreement without both foresight and a close review of every word in the contract.
Hire a Contracts Attorney When There Is a Dispute
You need to engage a contracts lawyer when dealing with a dispute or if there is a potential conflict. The actions that you take can go a long way toward determining the outcome of your case. For example, you can face severe consequences if you repudiate the contract, but you can also inadvertently accept the nonperformance if you allow the breach to continue with no action. Sometimes, it may feel like you are between a rock and a hard place in contract disputes, and a contracts lawyer can figure out the best strategy.
Your attorney can engage with the other party’s lawyer to resolve the dispute without litigation. You can execute a contract modification or reach an agreement before one party takes the case to court.
Regardless, you need to know your rights and obligations before the situation becomes a possible lawsuit. Your contracts lawyer can do the following to help you:
- Review the contract to give their best reasons for what they believe the document says and review the other party’s interpretation of the contract.
- Exchange letters with the other party’s attorney during the dispute to communicate positions and make demands
- Negotiate a possible settlement agreement or modification to the contract
- Help determine whether you have any defenses if the other party accuses you of breach of contract
- Draft and file a lawsuit complaint with the court
- File an answer on your behalf if someone is suing you, along with a potential counterclaim
- Develop your case through the discovery process
- Litigate your case in court if you cannot reach a settlement agreement
Alternative Dispute Resolution for Contract Disputes
You do not have to go to court for every contract dispute. If you are having trouble resolving your contract dispute, you can get help to address the matter outside the court system or courtroom. Many parties will engage in mediation to reach an agreement with each other. A trained mediator can help the two parties talk, find common ground, and bridge the gaps on contentious issues. Mediation is often successful, and it helps the parties avoid the need for a trial. The parties can even choose mediation before one or both file a lawsuit. Certainly, mediation is an off-ramp that can help parties settle a lawsuit even after a party has already filed it. The judge may even order mediation in your case before the lawsuit goes to trial.
The contract may require the parties to arbitrate instead of file a lawsuit. The court almost always upholds mandatory arbitration clauses because of the public policy interest in resolving matters without a trial. Some businesses prefer arbitration because there are fewer costs, and they do not have the wild card of an unpredictable jury. Others may wish to go to court because they have a more expansive discovery that allows them to gather more evidence.
Contact an Experienced Contracts Attorney for Your Business and Commercial Disputes
Hiring a lawyer who understands ADR can be beneficial in several ways. First, they can assess the specific circumstances of your case and help determine whether ADR is the right approach for you. They can guide you through the process, explaining the advantages and disadvantages of each method and helping you weigh your options. A lawyer with experience in contract disputes can also strategically engage in negotiations or represent you effectively in mediation or arbitration proceedings. By enlisting the help of a knowledgeable attorney at Gallian Law, you increase your chances of achieving a satisfactory resolution efficiently and cost-effectively.
