A contractual dispute is usually when a party in a contract has a disagreement concerning its terms or definitions, whether it’s you or your client. If handled poorly, contractual disputes can be costly and time-consuming, end up in court and damage your business relationships and reputation.
So, what should do if you’re on the receiving end of a contract dispute involving your business?
What causes a contractual dispute?
A contract must include a series of elements to make it valid. All parties must have a solid understanding of the terms in the contract and mutually agree on them. Without this mutual agreement or intention to contract on the stated terms, the contract is usually not legally valid and can be contested in court. Parties should also have capacity to enter into a contract.
Several steps need to be fulfilled during the formation of a contract. This includes:
- an offer being made
- an acceptance of that offer
- a form of payment or consideration for the goods or services concerning that offer
During these stages, contractual disputes can often develop. If you’re new to writing your own contracts, read our top tips for how to write a freelance contract.
Common types of disputes
In business, a contractual dispute could involve anyone, including your client or suppliers.
Examples of disputes include:
- Issues when your client reviews your contract.
- Issues concerning an offer you’ve made in a contract.
- Disagreements regarding the meaning of a contract’s technical terms.
- Mistakes and errors concerning the terms you’ve addressed in a contract.
- Fraud, such as party claiming they’ve been forced into signing your contract.
- Disputes where those involved in a contract do not stand by their original agreements made months or years earlier.
Disputes can also involve the performance of a party’s duties, or where they have failed to perform their duties, which have been addressed in a previously formed contract. This is known as breach of contract. An example could be a seller failing to deliver goods to a buyer.
Working towards a resolution
In the event of a contractual dispute, the important thing is to aim to resolve the situation as best you can. It’s wise to get the best legal support to help you find the right resolution.
You should aim to find a resolution that:
- Isn’t time-consuming and doesn’t affect the running of your company.
- Isn’t costly and doesn’t impact heavily on your finances.
- Doesn’t result in the dispute going to court to avoid additional costs and time.
- Doesn’t involve more people than necessary to help keep the dispute under control.
Handling the dispute with care can help you avoid damaging existing business relationships and your reputation.
How can a remedy solve a dispute?
There are two types of remedies: legal and equitable. Depending on the dispute, either of these remedies can be used to find the right resolution, such as during a settlement or in court.
Legal remedies usually allow a non-breaching party to recover monetary damages, such as an award paid to them from a breaching party for the losses they claim.
Equitable remedies are concerned with finding a solution to resolve the dispute and is usually not related to money. This could include:
- An order requiring a party to do something or to stop doing something
- Rewriting part of a written contract, for instance, to correct common mistakes or misrepresentation of technical terms
- Requesting a breaching party to perform their duties, according to a contract. For example, providing pre-paid goods or services to the non-breaching party
Getting the right support to handle a dispute
When handled without the right skill, knowledge and approach, a contractual dispute can end badly, causing harm to your relationships, reputation and finances.
It’s important to have professional support with the right expertise to help things run smoothly, while saving you time, money and stress.
A solicitor, for instance, can collect and analyse relevant evidence and investigate details. They can also document and report essential information to find the best resolution to settle a dispute effectively.
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