A contract is a legally binding agreement between two parties that details the duties and responsibilities of each party. Contracts may be oral or in writing, although most contracts must be in writing in order to be legally enforceable. Some examples of this include marriage contracts, and contracts involving amounts of money greater than $500. Oral contracts are more challenging to enforce and should be avoided whenever possible.
In order for a contract to be enforceable, there are specific requirements that must be met, such as each party exchanging something of value. Additionally, all parties involved in the contract must have a solid understanding of every term included in the contract. They must be in mutual agreement on those terms. A contract dispute occurs when any party involved in the contract is in disagreement regarding any of the terms or definitions contained within the contract.
Generally, in contract law, contract disputes may involve a breach of contract. Breach of contract refers to an agreement not being kept because one party failed to fulfill their obligation according to the detailed terms of the contract. Contract disputes can generally be categorized as one of two main types of breach:
- Material Breach: A material breach occurs when the contract is completely and irreparably broken. The breach is so deep that the rest of the contract is rendered completely useless and no other terms may be fulfilled. A material breach is sometimes referred to as a total breach. The non breaching party does not need to fulfill their contractual obligations, and they may sue the breaching party for any damages caused by the breach; and
- Minor Breach: A minor breach of contract is sometimes referred to as a partial breach, and occurs when the breach does not affect the whole purpose of the contract. Both parties are still required to carry out their contractual obligations. However, the non breaching party may still be entitled to sue the breaching party for damages.
An example of a material breach would be when one party purchases a house, and the buyer completes all necessary steps to obtain the house. The seller suddenly decides not to sell the house, or refuses to hand over the deed and keys to the house. This would be considered a material breach of contract because the breach renders the contract completely useless.
An example of a minor breach would be if a homeowner contracts an electrician to install a new lighting system with a specific brand of wiring. The electrician installs the lighting, but with a different brand of wiring than what was requested and agreed upon. This is a minor breach because the overall goal of the contract was still accomplished, but not according to specifics.
How Can You Avoid a Contract Dispute?
The best way to avoid a contract dispute is to ensure all parties are in agreement before signing the contract. All parties involved should clearly understand and agree to all terms included in the contract. Any language used in the contract should clearly state the duties of all parties involved in the contract, and any technical words or trade terms should be defined and clarified. Vague or ambiguous terms, or language with multiple meanings, could lead to a dispute later on.
Another way to avoid contract disputes is to continually document any negotiations through writing. Negotiations should be documented each step of the way; this could include keeping track of the history of offers, amount of product, prices, and other important terms. Doing so can minimize later disputes regarding forgotten contract terms.
As previously mentioned, one of the best ways to avoid a contract dispute is to ensure that the contract is in writing. This provides physical proof of the contract’s terms, as well as clarifies and details the overall goal of the contract. Knowing the goal before entering into any agreement is crucial to avoiding disputes later on.
What Is the Contract Dispute Act?
The Contract Dispute Act governs claims involving U.S. Federal Government contracts and defines various procedures that should be followed if the federal government has any claims against an independent contractor. An example of this would be if the federal government claims that the contractor committed fraud. Under the Act, federal claims against the contractor must be submitted for special review, to be conducted by the U.S. Contracting Office.
Claims for contract disputes must be submitted in writing. Claims submitted by contractors above $100,000 must be made in good faith, supported by accurate data, and must represent a reasonable estimation of the amount that the government owes.
What Remedies are Available for a Contract Dispute?
In general, there are two main remedies for contract disputes:
- Legal Remedies: This could include compensatory damages, restitution, and liquidated damages. Some contracts contain a liquidated damages clause, which determines (in advance) the amount of damages to be paid should one party breach the contract. The parties agree upon a damages figure during contract negotiations; and
- Equitable Remedies: Equitable remedies refer to legal remedies that allow the non breaching party to recover monetary damages, and could include actions that the court rules for the purpose of resolving the dispute. This generally means the parties must take certain actions in order to correct errors or perform their contractual duties.
Do I Need a Lawyer If I Have a Contract Dispute?
A skilled and knowledgeable contract attorney may be an invaluable asset when entering into a contract. An experienced contract attorney can assist in the contract’s initial drafting, and review the document to ensure understanding and legality. Finally, an attorney can represent you in court should any dispute arise, as needed.