The inherent purpose of a contract is to crystalize an agreement between two parties. Despite your best efforts to the contrary, contract disputes can still unfortunately arise. Some disputes arise because the contract is unclear, while other disputes arise because one of the parties is failing or refusing to perform the obligations required by the contract. Before you decide to terminate the contract or pursue legal action, you should first carefully consider some of the questions we’ve outlined below. In the heat of the dispute, however, it can be difficult to determine your priorities and understand your options. If you are facing a contract dispute and aren’t sure which way to turn, an Atlanta contract litigation attorney can provide valuable guidance.
Is Negotiation an Option?
Sometimes there is a dispute and the parties immediately adopt an adversarial posture, thus prohibiting them from reaching other, more cost-effective resolutions. Before threatening litigation, you should ask yourself whether it is possible to negotiate a solution that allows you to resume your relationship with the other party with minimal disruption to your business.
In other cases, the parties waste valuable time and money trying to work out a solution that just isn’t feasible. The other party may not be able to perform the contract under any circumstances or the relationship may have deteriorated to the point where constructive negotiation simply isn’t an option. In those situations, an Atlanta contract litigation attorney can extricate you from such stall tactics and help you enforce your rights.
Has There Been a Material Breach of the Contract?
Almost all contracts allow you to terminate the contract in the event of a material breach - one of the parties has failed to perform its obligation under the contract in some substantive or significant way. Unfortunately, it isn’t always easy to determine what would be a material versus an immaterial breach. However, in the event that you need to go to court to enforce the contract, this is one of the issues that will need to be decided.
An Atlanta contract litigation attorney can use their experience and knowledge of the law to determine whether the breach is immaterial or material. This can save you valuable time and resources in arguing over the breach and determining whether you should pursue litigation.
Is This a Relationship I Want to Keep?
Legal issues aside, business contracts are ultimately about relationships. You may have a fundamental disagreement with the other party, but that party may be one of your most important suppliers or a vendor who provides the best service in your area. Before deciding whether to escalate the dispute, consider whether the value of the relationship makes compromise the better course of action. Similarly, you may generate a significant amount of business for that particular vendor, and you may be able to leverage this fact to quickly resolve the dispute. There may be other factors at play that may color whether or not litigation makes sense. Unfortunately, going to court will typically destroy what has otherwise been a very beneficial relationship.
On the other hand, sometimes businesses struggle to maintain fruitless relationships - the other party simply doesn’t meet your needs and other vendors provide a better service or product at a better price. An Atlanta contract litigation attorney can help you identify whether or not you should sever the relationship and proceed with filing a lawsuit.
Does an Amendment to the Contract Make Sense?
Many contracts allow for amendments to be made, provided that both parties agree and the amendments are made in writing. If you are able to resolve your dispute, drafting an amendment to the contract may help prevent disputes going forward. Amendments can be particularly helpful when there is a good faith dispute over the interpretation of certain material provisions of the contract. An amendment can also be effective when you encounter a situation that was not contemplated by the original contract.
What Are the Costs Associated with Enforcing the Contract?
When disputes arise, tempers can flare. While principles are important, you also need to understand that the costs of enforcing the contract can outweigh the potential benefits. Litigation can be expensive. If you are worried about defending against a breach of contract claim, the perspective may be slightly different, but understanding the potential costs can help you determine whether you should try to fulfill the contract or negotiate a resolution.
As with any other business decision, you need to weigh those costs against the potential outcome with no guarantee of success. An experienced Atlanta contract litigation attorney can provide an estimate of what it would cost to litigate and the likelihood of success to help you make an informed decision.
When Does the Contract End?
It’s easy to get wrapped up in a dispute and start wondering whether you should terminate or go to litigation to enforce your rights. Sometimes, however, the best thing you can do is simply let the contract run out and not renew if your losses are minimal. Of course, you should make sure that the contract doesn’t require you to notify the other party of your intention to not renew.
Can You Terminate the Contract?
If you are bogged down in a contract dispute, you should carefully review the provision regarding termination. Many contracts provide two ways to terminate the contract:
Termination with cause. This is when you can terminate the contract due to a material breach. While this may seem like the obvious solution, relying on this provision can be difficult if there is disagreement as to whether there has been a material breach of the contract.
Termination without cause. These provisions allow one or both parties to terminate the contract for no specific reason, bypassing disagreements over whether or not termination is justified. However, there may be heightened notice requirements - you have to provide notice in writing 60 days prior to termination rather than 30 days with cause, for example. In addition, termination without cause often requires the terminating party to pay a portion of the contract to the other party upon termination.
Termination provisions can be complicated and difficult to understand. An Atlanta contract litigation attorney can review your contract and help you evaluate your options.
What Does the Contract Say About Breach?
Many business owners get so absorbed in the dispute that they fail to consider the actual terms of the contract. You may have a valid dispute, but the dispute is likely going to be governed by the terms of the contract. For example, the contract will contain provisions that likely address the following:
The contract will likely set forth what steps must be taken in the event of a breach - you may be required to provide notice of the breach and allow the vendor time to solve the problem.
The contract may require disputes to be settled via alternative dispute resolution, either binding or non-binding arbitration or mediation.
The contract may dictate that disputes be litigated in a particular jurisdiction that is not local to you.
The contract may entitle you to pursue attorney’s fees and costs or may award them to whoever is the prevailing party in the dispute.
The terms of the contract will shape how you proceed with the dispute. For this reason, you should review the underlying contract at the very outset of the dispute.
Are You at Risk for a Counterclaim?
Before you terminate the contract and pursue litigation, you should consider whether or not the other party could pursue a valid counterclaim against you. If they are successful, their counterclaim could offset any damages you may be entitled to. From a strategic standpoint, you also lose some control over the litigation if you have a counterclaim filed against you - even if you choose to dismiss your lawsuit, the other party can force litigation by pressing on with the counterclaim.
Of course, sometimes the other party will threaten or even file a counterclaim that has no valid basis. Before making up your mind one way or the other, you should have an open and candid conversation with an experienced Atlanta contract litigation attorney. They can evaluate any potential defenses or counterclaims you may encounter.
Can You Withhold Payment or Service?
When disputes arise, many businesses immediately assume they can either refuse to pay or not provide service until the issue is resolved. Fortunately or unfortunately, this is not the case in many contracts - there may be provisions that govern how and when you must raise your dispute but that you are obligated to continue making payment or providing service. In fact, you may be considered to be in breach if you choose to withhold payment or refuse to perform. This is one of the situations where you may find yourself facing a counterclaim even if you believe the other party has breached the contract.
What Remedies Are Available?
Another important question to consider is what remedies may be available at law or pursuant to the contract - for example, some contracts contain “liquidated damages” provisions that limit you to a specific amount of money in the event of a breach. However, the monetary damages may be a small consolation if what you really want is for the other party to perform a particular service or provide a specific product.
Generally speaking, the remedies available in a breach of contract claim are as follows:
Monetary damages. This is financial compensation to the party harmed by the breach. The amount of damages awarded to you may depend on a variety of factors, and you may have a duty to mitigate your damages (i.e. make an effort to find some way to offset your losses). In general, monetary damages are “compensatory” in that they are intended to compensate you for your financial losses. Punitive damages that go beyond compensatory damages are available only in rare cases.
Restitution. Restitution can look very similar to monetary damages in that the injured party is restored to the position they were in prior to the contract. As a result, the breaching party may be ordered to refund a deposit or return other property that was transferred as part of the contract.
Specific performance. This is when the breaching party is ordered to carry out its obligations in the contract. For example, consider two parties that have entered into a contract to purchase a commercial property in a prime location for the buyer’s business. The purchaser pays the deposit and meets all of the other conditions of the contract, but the seller decides to sell to another buyer for a higher price. Even if the buyer was awarded monetary damages, they do not have the opportunity to buy another property in the same location. Instead, the buyer could sell for specific performance, ordering the seller to sell the property to them at the price that was originally agreed upon.
Rescission and reformation. In situations where the contract may be based upon fraud, mistake, undue influence, or similar causes, the court may order the contract to be terminated (i.e. “rescinded”). The court may subsequently reform the contract according to the parties’ intent while accounting for the mistake or fraud.
Understanding the remedies that are available can help you decide how to proceed. An Atlanta contract litigation attorney can help you determine which remedies would be appropriate to pursue in your case.
Reach Out to an Atlanta Contract Litigation Attorney to Discuss Your Contract Dispute Today
At Robbins Ross Alloy Belinfante Littlefield LLC, we understand the challenges that business owners face when it comes to deciding how to deal with contract disputes. Using our experience as business litigators, we help our clients find cost-effective solutions to whatever problems they may be facing. From settling contract disputes to aggressive representation in court, an Atlanta contract litigation attorney from our firm had the knowledge, experience, and skill you need to get results. To discuss your case and how we can help, call us today at 678-701-9381 or contact us online to schedule a consultation.