Contract Dispute
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What is a Contract Dispute?
A contract dispute happens when one or more parties disagree on the terms, definitions, and conditions contained within it. In such a case, the contract may be contested in court.
A contract dispute arises between parties in a confidentiality agreement or nondisclosure agreement when information or intellectual property has been shared against the contract’s obligations.
Although contracts are often negotiated, people do not always see eye-to-eye. When there is a breach of contract, or one or both parties disagree on the terms or definitions contained in the contract, a contract dispute can arise.
Here is an article about the legal definition of a contract dispute.
Who Can Dispute a Contract?
Any involved party can dispute a contract, but it generally occurs when one party accuses another of a breach of contract.
Under this breach, one party asserts that one or more parties have not fulfilled their agreement's conditions or have violated previously agreed-upon terms.
All parties can sue one another for damages as the result of a contract breach. In case of a confidentiality and non-compete agreement breach, a party may sue another for using intellectual property or stealing ideas for personal gain.
It is not uncommon for one party to dispute a contract and be countered by the accused party. For example, they may claim that there were limitations to the terms not covered under the initial contract, which renders their actions legal and just.
Ultimately, if mediation cannot occur amicably through an attorney, the contract dispute may go to court.
Here is an article about what constitutes a legal contract.
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How Do You Dispute a Contract?
If you want to dispute a signed contract, you can send a letter of termination to the contract issuer.
In most business contracts, a contract termination agreement outlines the requirements for cancellation. This may include a monetary fee or other requirements, such as removing all references to a business to avoid any future affiliation.
If you deliberately breach a contract, you can face penalties under the contract’s terms and conditions. These vary by contract, and it is not advisable to deliberately breach a signed agreement without first consulting with an attorney.
Working with an attorney who knows contract law well can prevent you from making any big mistakes that result in major financial losses or even legal penalties.
If you are disputing a non-competition agreement, you will need to demonstrate there is no need to enforce such agreement or prove there has been a breach of contract. You may also argue that the terms of a contract were not set for a fair amount of time.
Remember that every contract lays out limitations for its parties to adhere to; if you feel that these terms somehow negatively affect your business’s performance, you may use that defense to justify disputing the contract.
Here is an article that can help you find loopholes in a non-compete agreement.
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Types of Contract Disputes
The most common contract disputes arise from a breach of contract. There are two types of contract breaches to know.
- Material breach: This is a complete breach, meaning the rest of the contract is null and void. Also known as a total breach, a material breach of contract means that the affected parties are no longer required to fulfill their obligations and may decide to sue the breaching party or parties for damages.
- Minor breach: A minor breach of contract does not completely nullify the terms and conditions of the agreement. For example, in a confidential information agreement, a minor breach may result in some damages that a party can sue for compensation. Still, it does not mean the breaching party must no longer uphold their agreed-upon obligations.
It is easy to differentiate between material and minor breach by considering the goals and consequences of the actions. For example, suppose a person or company’s actions alter the goals of an agreement entirely. Then, a material breach is likely to blame.
If a goal is achieved, but it is not done so in an agreed-upon fashion or under false pretenses, then a minor breach has occurred.
There are several other types of common contract disputes you may encounter.
1. Non-disclosure Agreement Dispute
A non-disclosure agreement (NDA), also known as a confidential disclosure agreement (CDA), protects an individual or business’s sensitive information from public knowledge or personal use.
For example, a company partnering with a consultant may have them sign a CDA or NDA to prevent sharing their patented technology or methodologies with others.
A contract dispute can then arise if the contract issuer accuses the signee of sharing, leaking, or stealing information.
2. Consumer Contract Dispute
When consumers purchase a product with a warranty, they expect to be sold an item free of any hazards or defects.
Suppose a company sells a product with a warranty that violates the said warranty. The consumer may sue the company for a breach of contract.
Although it requires no signature, a product warranty is a contract between the seller/manufacturer and the consumer. If a product harms a consumer or does not work according to its promised and advertised standards, consumers may sue for damages.
3. Partnership Dispute
Modern companies rely heavily on partnerships with other businesses. When a company feels its partner has not fulfilled its requirements or otherwise breached a partnership agreement, it may sue for damages.
However, a partnership must have clear objectives, expectations, and requirements in its terms and conditions. Otherwise, it can be difficult for a company to prove that a legal breach has occurred.
This is why measurable objectives are always beneficial in company agreements. It is another reason monetary compensation or data-driven transactions are so common; it is easier for all parties to be held accountable when quantitative figures are used as part of their agreement.
4. Sale of Goods Dispute
Sales of goods contracts between suppliers and merchants are prone to disputes due to their open-ended nature and often vague terms.
In a sales of goods contract, the merchant trusts that the supplier will provide goods to their customers. As a result, disputes over failure to deliver products as advertised or even ship them are highly common between wholesale merchants and their suppliers.
If a product does not arrive in a timely manner, is never shipped, or is significantly not as described (SNAD). A merchant may sue the supplier for a breach of contract.
Here is an article to learn more about civil wrongs and what might qualify as a breach of your contract.
What Causes a Contract Dispute?
Any suspected or potential breach of contract can lead to a dispute. All it takes is one party to believe another has broken the agreement to cause a dispute.
No legal guidelines determine what someone can or cannot take a dispute over. However, to prove their case, the accusing party will need to bring forth a sound argument and any evidence that the accused has violated their agreement.
3 Ways to Resolve a Contract Dispute
There are three ways that parties may go about resolving a dispute. These are:
- Renegotiating terms with a mediator, i.e., an attorney, and revising the contract.
- Mutually agreeing to terminate the contract.
- Suing for damages and compensation in court.
Suppose parties are willing to negotiate, even through their own attorneys. In that case, you may be able to resolve contract disputes without needing to go to court.
How Do You Avoid a Contract Dispute?
The easiest way to avoid a contract dispute is to use a contract lawyer to draw up all agreements before signing.
Sound legal contracts set clear expectations, requirements, and terms for all parties.
Negotiating contracts before signing is also a good way to prevent disputes. If all parties feel that they are receiving a fair and equitable deal, they are less likely to breach the contract later.
Unfortunately, disputes are not always preventable. However, open communication, willingness to negotiate and compromise, and clear termination clauses in all agreements can prevent lengthy disputes.
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ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.
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For over thirty five (35) years, Mr. Langley has developed a diverse general business and commercial litigation practice advising clients on day-to-day business and legal matters, as well as handling lawsuits and arbitrations across Texas and in various other states across the country. Mr. Langley has handled commercial matters including employment law, commercial collections, real estate matters, energy litigation, construction, general litigation, arbitrations, defamation actions, misappropriation of trade secrets, usury, consumer credit, commercial credit, lender liability, accounting malpractice, legal malpractice, and appellate practice in state and federal courts. (Online bio at www.curtmlangley.com).
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Davis founded DLO in 2010 after nearly a decade of practicing in the corporate department of a larger law firm. Armed with this experience and knowledge of legal solutions used by large entities, Davis set out to bring the same level of service to smaller organizations and individuals. The mission was three-fold: provide top-notch legal work, charge fair prices for it, and never stop evolving to meet the changing needs of clients. Ten years and more than 1000 clients later, Davis is proud of the assistance DLO provides for companies large and small, and the expanding service they now offer for individuals and families.
"Amazing work! I am so pleased that I was able to get my contracts in order so quickly! I feel very confident sending my contracts to future clients now!"
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Terry Brennan is an experienced corporate, intellectual property and emerging company transactions attorney who has been a partner at two national Wall Street law firms and a trusted corporate counsel. He focuses on providing practical, cost-efficient and creative legal advice to entrepreneurs, established enterprises and investors for business, corporate finance, intellectual property and technology transactions. As a partner at prominent law firms, Terry's work centered around financing, mergers and acquisitions, joint ventures, securities transactions, outsourcing and structuring of business entities to protect, license, finance and commercialize technology, manufacturing, digital media, intellectual property, entertainment and financial assets. As the General Counsel of IBAX Healthcare Systems, Terry was responsible for all legal and related business matters including health information systems licensing agreements, merger and acquisitions, product development and regulatory issues, contract administr
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