Seen by many as “the cost of doing business,” contract disputes are commonplace in virtually all business sectors nationwide. When most agreements are drafted and signed, all signatures bind the parties together for a predetermined period of time. But far too often, one party may deviate from the terms set forth in the agreement, and cause a breach of contract.
Let’s look at seven of today’s most common contract disputes, most involving well-known agreements signed hundreds of times daily.
Language in commercial lease contracts, or the lack thereof, causes numerous disputes between business owners renting space, and building owners wanting their rent paid every month. A common component often disputed is called an unlawful detainer, which is an eviction action that demands up to twelve months of rent payable immediately prior to the lessee’s exit. The lessor may have not specified the exact amount payable upon breach, but demands the full amount anyway. In some cases, the lessee simply didn’t follow contract terms or didn’t understand them.
Some businesses want their employees to sign non-compete agreements which activate immediately when they begin work. These contracts dictate that once an employee severs their work relationship with an employer, they cannot work for the employer’s competitor for an “x” number of years. There are some agreements where employees can’t work in the same field at all for a predetermined amount of time. Non-compete agreement disputes are contentious at best.
Governed by the Uniform Commercial Code, the loosest contracts you’ll find are those involving the sale of goods between merchant and supplier. As such, these open-ended contracts are heavily disputed in wholesale and liquidated merchandise transactions, to name a few. In fact, some contracts put before buyers won’t always guarantee performance or that customers will receive the products they purchased. Products significantly not as described (SNAD) or those that never arrived are easily litigated if the contract guarantees the product the buyer is to receive.
There are many reasons one would request another to sign an NDA. Sometimes, an intended buyer or investor will be bestowed with sensitive information that, if leaked, could ruin the seller or business model. Other times, an individual wishes to receive quotes for work on something top-secret, cutting-edge or patent pending. You’ll find these agreements are disputed when the signee is accused of leaking information (or actually does).
While these are rather common, a mountain of evidence may be necessary to prove the individual accused of breaching the NDA actually did so knowingly and willingly.
Businesses enter a legally binding contract when they sell that $400 game console, with proof in that little piece of paper sitting at the bottom of the carton called a warranty.
Manufacturers promise consumers that, in exchange for cash, they’ll receive a product that’s free of defect and hazard. They promise that if the item isn’t as described, you can return the product for a full refund (unless it gets damaged by the consumer). By failing to honor that warranty, or by selling products that injure or hurt the consumer, the manufacturer has breached consumer trust and rendered their warranty useless. This type of contract dispute is far more common than others in contract law – yet it never requires a single signature.
Today’s interconnected world relies on contracts between various businesses around the globe to operate efficiently. Your website hosting? That’s a company contract. Just took on several new clients for your writing company? There was probably a contract drafted for that. Everywhere you look, businesses are contractually involved with another proprietor in some manner.
When one party breaches the agreement, and calculable losses start mounting, they may be civilly liable for those damages provided the language in the contract was clear. For example, if you’re promising to lease 100 GB of cloud space to another business each month, but only provide 50 GB, you’ve breached a company contract.
By definition, material breaches are the outright refusal to follow the terms set within the contract – literally all of them. It calls to question whether the contract should’ve been formed to begin with, let alone signed.
The damages caused by material breaches could amass millions or more. These are serious, and should be treated as mission critical if you’re accused of causing irreparable differences so grave the contract is thematically useless.
The most interesting type of contractual disagreement isn’t a contract at all, but falls under contract law. When two parties have a written obligation to each other, and an outside party attempts to damage that relationship by interfering with one or all components of the contract, a tort claim can be made by either or both parties damaged by the interference.
One example would be if the NBA had a contractual obligation to a major athletic clothing line, but the NFL decided to “entice” the clothier away by making outlandish offers or promises. In this scenario, the NFL committed tortious interference and would be liable for damages the NBA suffered.
Language is as important to contracts as the people who will be bound by their terms. Properly written contracts with language each party can clearly understand could stop many contract disputes before they start. Of course, one cannot predict where and when another party will breach the contract, but with clear and concise wording, any sensible party would be hard-pressed to blatantly deviate from the terms set forth.
Due diligence is another key component of successful contracts. Simply put, do your homework and choose wisely who you adjoin signatures with on paper.
If you’ve done your part and another party breached their end of any contract you signed with them, Smith Kendall, PLLC offers assistance with TROs, pre-litigation and other forms of contract defense.