I’m having a dispute with someone over a contract. What should I do?

Contract disputes are very common among business owners and entities alike. When you find yourself in a dispute over a contract, the devil lay in the details, so to speak. Below, we’ll go over some basic steps to take to help you navigate some common contracting issues.

What is a contract and why are they important?

Put simply, a contract is an agreement between two parties in a bargained-for exchange. Contracts are more than a memorial of your agreement with another person or entity: they render said agreement legally enforceable. In other words, a valid contract allows you to file a lawsuit in court to be compensated by the breaching party or, in extraordinary circumstances, have the court order the breaching party to perform their end of the agreement.

Prevention

The best way to deal with a contract dispute is to ensure the contract is the most accurate and up-to-date reflection of what you have agreed to. Not all disputes can be prevented, but you can significantly reduce the chance of enduring the length and cost of litigation to resolve a contract dispute by being proactive in the early stages of the contractual relationship.

Drafting the contract

While not every agreement needs to be in writing to be enforceable, the law recognizes that some contracts must be in writing (and signed!) to be enforced in the interest of preventing fraud. Many business contracts fall within this Statute of Frauds. That said, the written contract should be the best and clearest reflection of an agreement between you and another party. A well-drafted contract allows each party to understand their obligations and, more importantly, leaves less room for rogue interpretation of any provision. Here at Spencer Law, our experienced team of attorneys are ready to draft the contract for you, so you can rest assured that the contract is indeed the most accurate reflection of your agreement.

Reading the contract

It should go without saying, but it is imperative that you thoroughly read the contract, especially before signing it. You should read the contract at least three times: once to get a gist of what exactly you are agreeing to, another time to generally note any provisions you either don’t understand or don’t wish to agree to, and a third time to note any typographical, grammatical, or language issues. While you read, keep in mind that should a dispute arise and you find yourself in court, the court will give great deference to the language of the contract before it considers any external evidence that may be relevant to the agreement.

Here are some other tips to consider while you read:

• Pay close attention to forum selection clauses and choice of law clauses. The issue of where you could potentially litigate is just as important as your obligation to perform under the contract. In keeping with the principle that courts give deference to the parties’ agreement, courts will generally allow parties to agree to a venue and choice of law, even if the agreement contradicts the state’s venue and choice of law statutes. In other words, these provisions could force you to litigate in California, for example, even though you are (or your business is) a Texas resident.

• Note provisions that prevent assignment or subrogation. If your company decides to merge with another, or you otherwise decide to sell your business, a contract you have with another company could inadvertently be breached by selling the performance rights of the contract to another person/entity.

• Ensure that none of the provisions conflict with one another. Provisions conflict when they direct the parties to take opposite actions for the same provision. For example, let’s say you contract with another party for the sale of a product. If one provision calls for the sale of that product in blue, but another provision in the same contract calls for the sale of the product in purple, the provisions conflict. Consistency is key in a well-drafted contract.

Alternative Dispute Resolution

Not all contract disputes require filing a lawsuit right away. Alternative dispute resolution offers contracting parties a shorter, more cost-effective method of resolving a contract dispute.

Mediation

A mediator serves as a neutral third party that will allow both parties to explain their position in a dispute and will push the parties to come to a compromise. At the conclusion of mediation, should the parties agree, the mediator will direct the parties to sign a binding Mediated Settlement Agreement (MSA). An MSA is absolutely binding, meaning it cannot be altered or reconfigured in any way by the courts or by any party unilaterally. Mediation is often faster and more cost-effective than a traditional lawsuit.

Arbitration

The parties to a contract must agree to arbitration to utilize this method of alternative dispute resolution. Arbitration is, in a sense, an expedited lawsuit. Both parties will have the opportunity to present evidence of their claim to an arbitrator, who will act as a judge in resolving the dispute. After a review of all the evidence and a hearing on the issues, the arbitrator will render a decision that they may designate as either binding or nonbinding. If the decision is binding, either party may enforce the decision with the help of the courts.

Litigation

Lawsuits can be daunting, but it is an option often utilized to resolve contract disputes. If you choose to go this route, selecting an attorney to diligently represent you can be even more of a hassle. Here at The Spencer Law Firm, our experienced team of attorneys stand ready to defend your rights under any contract. We take great pride in our professionalism and efficiency in litigating our cases, as both have allowed us to build a loyal clientele that have allowed us to represent them for years after their case has concluded.

Whether you’re in need of an attorney to assist you in drafting a contract, or you find yourself party to a lawsuit over a contract, For a personalized review contact Texas attorney Bonnie Spencer or Jayda Morgan at (713) 961-7770. 

Disclaimer:

The information provided in this article is for general informational purposes only and does not constitute legal advice. The contents are not intended to be a substitute for professional legal consultation. Readers are encouraged to consult with our qualified litigation attorney regarding specific legal issues or disputes. The Spencer Law Firm and the author of this article disclaim any liability for actions taken based on the information provided herein.

by Associate Attorney

Jayda Morgan