Contract disputes are somewhat common. Businesses negotiate contracts with workers, suppliers, landlords, customers and service providers. They expect the other party to uphold the agreement in good faith.
However, contract violations are common. The parties may disagree about what the contract actually requires, or one party may blatantly choose not to uphold the terms of the agreement. When that happens, the other party to the contract may need to contemplate the various options available for resolving the dispute.
How can organizations settle disagreements about contracts?
Through cancellation or rescission
In some cases, the way that one party violates a contract can undermine the future working relationship between the parties. If the contract breach highlights questionable business ethics or an inability to meet contractual obligations, then canceling the contract might be the best option. The parties could mutually agree to cancel the contract, or the plaintiff alleging a contract violation in court could ask for rescission or contract cancellation as a way of addressing the issue.
Through contract enforcement
Typically, contracts are binding agreements. When one party doesn’t uphold their duties as outlined in a contract, the other could go to court and ask for judicial support. A judge could issue an order of specific performance or an injunction as a means of enforcing the agreement between the two parties. Contract enforcement can be a viable option in cases involving poor work standards for a project or unfulfilled vendor agreements.
Through damages and penalties
In some cases, contract violations have clearly generated financial consequences for one party. It may be possible to seek financial compensation from the party that didn’t uphold the agreement. If the original contract included penalty clauses, litigation could result in the courts upholding contract terms that create financial consequences for certain contractual breaches. If the plaintiff can show that the company suffered financial setbacks because of the contract issues, then it may be possible to request damages from the party in violation of the initial agreement.
In some cases, negotiations between a frustrated business and an outside party can result in an amicable resolution to contract disputes. Other times, litigation is the only reasonable means of addressing a contract breach. Reviewing an original contract and the impact of the contract dispute with a skilled legal team can help business owners and executives choose the best solution available given their circumstances.