Contracts are basically plans businesses make together, and as the saying goes, “no plan survives first contact with the enemy.” Who is the enemy in this scenario? It could be the other party to that contract, but usually, it’s just life or miscommunication or changed circumstances. Whatever the cause, businesses frequently find themselves disagreeing over a contract. Most of the time they can work it out themselves, but sometimes that just isn’t possible.
There are steps you can take to keep these conflicts to a minimum and to improve your position when the disputes do flare-up.
Make Your Contracts Make Sense
If we look at contracts as plans, then we see the need for clarity. Businesses often find themselves in dispute because they didn’t spell out their expectations clearly. It isn’t enough to think you know what the contract terms mean; you need to know what the other party thinks they mean. The time to find out if you read those terms differently is before you sign. When you do sign the agreement, it should tell you what the other party expects from you and tell the other party what you think they are agreeing to. Use plain English and short sentences. If you aren’t sure what a contract says, ask — and don’t sign until you understand it.
It’s worth taking some time to review and revise each contract your business uses, including those involving employees, suppliers, customers, and vendors, making sure the language is clear and protects your interests. When disputes pop up, learn from them and take steps to create more effective contracts to avoid future litigation.
Clearly Identify the Breach
When you get into a lawsuit — or are about to get into a lawsuit — you need to know just what it is you’re fighting over. To negotiate a settlement in a contract dispute, or to convince a judge or jury to rule in your favor, you need to establish 1) what term the other party breached and 2) what they did to breach it. For example:
- Did a customer fail to pay you? Identify the contract term that spells out their payment obligation, including how much they owe and when it was due, and be able to show that you did the work or delivered the product that triggered their duty to pay.
- A supplier delivered a component late? Find the provision that sets the delivery deadline, document the date the delivery finally happened, and be prepared to explain why the delay matters.
Articulate the Damages Stemming From the Breach
Once you’ve shown that a breach has occurred, you’ll also need to show how the breach harmed your business. If that supplier was late delivering an essential component, what was the consequence? Did the late delivery delay your production? If so, did the delay make you lose money? Sometimes this calculation is straightforward, but in many breach of contract cases, the math can be much more complex. The contract itself may set limits on what kinds of damages can be awarded or how much. If you are struggling to quantify the economic impact of the breach, it’s a good idea to work with a knowledgeable business law attorney who can help you arrive at a realistic estimate.
For more information about how to successfully navigate breach of contract litigation, or to learn more about how you can protect your Minneapolis or St. Paul business from future litigation, reach out to the friendly legal team at Rubric Legal LLC today by calling (612) 465-0074.