6 Facts About Contract Dispute Litigation For Your Small Business

Disputes are not uncommon. Best friends disagree, couples misunderstand each other, and even little children quarrel from time to time. That’s why you shouldn’t be surprised if falling-outs arise in a business setting – whether you run a small retail shop or own a large enterprise.

Many commercial lawsuits involve contract disputes. Even as a small business, you have to protect your livelihood from breach of contract violations. Educating yourself about the matter is a good thing. Having sufficient knowledge will help prevent future problems or help you get out if you’re already caught in a mess.

What Is a Contract Dispute Litigation?

Breach of contract typically occurs in a commercial setting. It happens when a party fails to comply with the terms stated in the agreement, does not perform their responsibilities, or executes an action that prevents the other party from fulfilling their obligations. It can be as simple as delays in delivering goods or something more severe like supplying defective materials. When the aggrieved party proceeds to file a lawsuit, that is called a contract dispute litigation.

Now that it’s clear, here are six essential facts you should know and how they can protect your small business.

1. Contract Disputes Can Be Talked Out

Letting your emotion take control is bad for business. Oftentimes, there’s no need to take a breach of contract situation to court. What both parties need is a level-head approach and discuss possible alternative solutions. So if you’re business partner violates the contract, don’t think about suing right away. Contact your lawyer first and see if the other party has accidentally violated the contract. On the other hand, if you’re the one being accused, keep calm. Reach out to your business partner, explain your side of things, and propose to make amends.

Don’t let your emotions get in the way! You will surely find a way to talk the problem out.

2. Understand The 4 Types of Contract Breaches

Knowing the four types of contract breaches helps you avoid committing them.

  • material breach happens when one party fails to uphold the terms in the contract, resulting in considerable financial losses for the aggrieved party.
  • partial breach occurs when a party manages to fulfill their duties but didn’t completely follow the conditions stated. A perfect example would be delays.
  • An anticipatory breach can be brought up if you suspect your business partner to have violated a section of the contract, but you’re not sure what or how. You need to gather evidence to prove this in court.
  • An actual breach is the worst violation among the four. It occurs when the accused party deliberately refuses to fulfill their obligations without considering the extent of the damage done to the aggrieved party’s business.

3. What To Do When Someone Accuses You

Relax. Take a deep breath and collect your thoughts. Nothing messes up an unfavorable situation more than a surge of panic. As advised earlier, try to settle things with your partner outside of court. But if this isn’t possible, you’ll have to make preparations to defend your business.

The first rational course of action is to contact your lawyer or hire one. He can assist you in coming up with a strategy and gather documents to reinforce the defense. You can claim several defense angles, such as duress, fraud, undue influence, error, or statute of limitations. Whether you win the case depends on the strength of evidence against you and the solidity of your defense. This is the kind of situation where you’d want to hire an excellent litigation lawyer.

4. What To Do When You’re The One Being Wronged

There’s not much difference compared to the scenario above. Although this time, you’ll be the one initiating the attack. As always, it won’t hurt to give your partner the benefit of the doubt until you get hold of solid proof. However, when things escalate into a legal battle, you’ll have to prepare concrete evidence that the contract has been breached, records of the damages, a copy of the agreement, and witnesses if possible.

 5. Conclusion of a Contract Dispute Litigation

There are only two ends to a lawsuit: you either win or lose. If proven guilty, the accused party will have to compensate the other for damages, specific performance, and cancellation and restitution.

  • Damages: Payment for damages is the most common remedy to a contract dispute. There are many kinds of damages, including compensatory, nominal, punitive, and liquidated damages. Either way, all of these aim for the same purpose: to reverse the aggrieved party’s losses.
  • Specific performance: If paying for damages does not suffice, the court will order compensation by specific performance. This means that the breaching party will have to perform a specific act, which is usually the satisfactory completion of their obligations in the contract.
  • Cancellation and Restitution: This is actually the most generous punishment a breaching party can get. Cancellation terminates the contract as a whole and relieves both parties of further obligations. Meanwhile, restitution means returning the non-breaching party to a position prior to the breach’s occurrence. Things may seem like a happy ending, but keep in mind that the trust is already broken, reputation tarnished, and the relationship severed.
It’s wise to keep a lawyer on retainer.

 6. Keeping a Lawyer on Retainer Helps a LOT

Welcome to the last and least known fact about contract breaches. Most business owners only feel the need to hire a lawyer when they get caught in a dispute. However, having one on retainer will keep you out of the mess itself. On top of drafting and reviewing your contracts, attorneys can also provide you legal advice. Plus, he can connect you with the right people if needed. Remember, prevention is better than cure!

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