In the United States, contracts are used to formalize all types of transactions. It would be nearly impossible to own a car, a home, or any other living necessity without signing a contract. While the protection of each party’s interests is a contract’s primary functions, if the terms of a contract are breached, legally ambiguous, or contested for any number of reasons, disagreements may arise and the interests of both parties may be put in jeopardy.
THE BASICS OF CONTRACT LAW
In layman’s terms, a contract is defined as “an agreement between private parties creating mutual obligations enforceable by law.” While there are some situations where an oral contract may suffice, written contracts are widely preferred as they are more easily enforced by law and reduce the risk of a misunderstanding between parties. For any contract to become legally binding, there are 5 main conditions that must be satisfied; offer/acceptance, mutuality of obligation, consideration, capacity (capable parties), and legality (legal purpose).
While some lawyers may use different terminology, the basic requirements (i.e. elements) of a contract can be defined as:
- Offer/Acceptance: There must be a specific offer followed by clear acceptance (i.e. Do you want ‘X’? … Yes, I do want ‘X’!).
- Consideration: Both parties must provide something of value in the exchange (i.e. you give me ‘X’ and I’ll give you ‘Y’). This can also be stated in the form of a promise.
- Mutuality of Obligation: Neither party can have an unrestricted right to cancel the contract or not deliver on their end of the bargain. In other words, “both parties must be bound to perform their obligations or the law will treat the agreement as if neither party is bound to perform” (US Legal, 2019).
- Capacity: When a contract is signed, each party must be fully capable of understanding what they are agreeing to and do so willingly. While there are a number of reasons why an individual could lack the ability (i.e. capacity) to enter into a contract, some of the most common disqualifiers are:
- Under the age of 18 (minors)
- Under the influence of drugs or alcohol
- Diagnosed with a mental disability or have any other conditions which may impair their cognitive functioning
- Forced, coerced, or unlawfully persuaded to enter into an agreement (i.e. under duress)
- Legality: For a contract to be enforceable by law, the purpose of the agreement itself must be a legal one, otherwise it is void. Simply put, you cannot create a legally binding contract that involves any sort of crimes or unlawful activities (i.e. you cannot contract someone to rob a bank or commit fraud on your behalf).
COMMON REASONS FOR CONTRACT DISPUTES
Although contract disputes can arise from even the slightest disagreements, typically, they stem from an allegation that one party has committed a breach of contract. In law, breach of contract refers to a situation where the terms of an agreement have been violated in any way, regardless of whether it was intentional or not. Contract breaches can generally be classified in one of two ways:
- Minor Breach: When one or more terms of the contract have been violated, but in such a way that does not impact the entirety of the agreement. For example, if you were to contract someone to paint your house using a specific color/brand of paint and they use the wrong color, but the right brand is used and your house is otherwise painted according to the agreement, the painter committed a minor breach of contract.
- Material Breach: When a party commits a violation of a contract’s term that undercuts the purpose of the contract entirely and renders the original agreement useless (e.g. you buy a car but the seller refuses to give you the keys). This is sometimes referred to as a “total breach” and in cases where a material breach has occurred, the breaching-party would forgo the right to whatever good, service, or compensation that was promised on behalf of the non-breaching party.
Beyond minor and material breaches, contract disputes arise most frequently when there are disagreements or misunderstandings over the terms of an agreement. While these types of contract disputes are common, they can be easily avoided by putting agreements in writing, using unambiguous/specific language when defining the terms of a contract, and making sure both parties fully understand and agree to the contract upon signing.
WHAT ARE THE OPTIONS FOR RESOLVING CONTRACT DISPUTES?
How you decide to resolve your contract dispute will depend heavily on the nature of the disagreement, who the opposing party is, and what you value in the resolution process. In general, if a contract dispute can be remedied without hiring lawyers and going to court, it will save both parties a considerable amount of time and money; however, in cases involving larger business entities and/or exchange values, an extrajudicial resolution may be impossible. In these types of cases, hiring an experienced contract dispute attorney can mean the difference between winning and losing your contract dispute case.
Once you have hired an attorney, there are numerous methods of dispute resolution available for settling your case. In general, these methods fall in one of two legal action categories; litigation (i.e. trial) and alternative dispute resolution (ADR).
Legal methods of remedying a contract dispute:
- Alternative Dispute Resolution (ADR): In law, ADR refers to the numerous methods for settling legal disputes that do not involve going to court, such as mediation, arbitration, or structured negotiation. Each method of ADR adheres to its own unique set of rules/guidelines and as such, they vary greatly in cost and expediency. In general, however, ADR is cheaper and more convenient than litigation. One drawback from certain types of ADR (ex. mediation), is that the terms of a resolution may not be binding and thus not legally enforceable.
- Litigation: In the case of a contract dispute, resolving your case through litigation would entail choosing a contract dispute attorney, extensive pre-trial preparations/court proceedings, and a comprehensive multi-staged trial followed by jury deliberations and a verdict. Litigation is typically the longest and most expensive method of settling a contract dispute and it is typically reserved for when other types of resolution have failed.
If you require legal assistance for a contract dispute, it is crucial to hire an attorney who will not only win for you, but who will also choose the type of dispute resolution that will save you as much time, energy, and money as possible. After reviewing the specifics of your case, an experienced attorney would likely begin by explaining which methods of dispute resolution may be appropriate for your case and why. While your legal team will need to consider any demands/requests from the opposing party, in all likelihood, the lawyer you hire will attempt to settle your case through various means of ADR before pursuing a decision via trial.
If you are involved in an ongoing contract dispute or are unsure if the terms of a contract have been breached, it is imperative that you consult an experienced contract dispute attorney. At Halperin & Halperin P.C., we have over 40 years of experience protecting clients in ongoing contract disputes and our legal team has successfully litigated even the most challenging cases. We take pride in treating every prospective client like family, and in the event that we cannot help you directly, we will find someone who can. Call or email us today for a free consultation.