Contracts provide businesses with a clear understanding of the terms of deals with other companies. These documents must be agreed upon by both parties, or they aren’t valid. It’s critical that both parties fully understand what they’re agreeing to.
When one party doesn’t comply with the terms, they’re in breach of contract, which can cause a contract dispute. This can often come with significant penalties. Understanding a bit about contract breaches is beneficial for anyone entering into them.
Causes of contract disputes
Vague terms and ambiguous contract language are primary sources of conflicts with contracts. This means that anyone who’s entering into a contract should ensure the terms are clear. Look at the payment terms, scope of the project and delivery conditions to ensure they’re fully understandable without being debatable. If anything isn’t clearly defined, the contract should be modified for clarity prior to being signed.
Failure to perform is another cause of contract disputes. This can be that one side missed a deadline or that the project wasn’t up to the required standard. In some cases, external issues like weather or supply chain issues can lead to a failure to perform. Those situations should be covered by the contract to avoid issues in the future.
Preventing and resolving disputes
The best way to avoid a contract dispute is to write a strong, detailed contract in the first place. It should outline who’s responsible for what, when it needs to happen, how payment will work, and what happens if something goes wrong. There should also be a clause that governs the resolution method. Some contracts allow for litigation, but others limit this to alternative dispute resolution methods like arbitration or mediation.
If there is a contract breach, learning the options immediately is beneficial so the company can plan accordingly. This may involve asking someone familiar with these matters to step in and provide assistance.
