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Methods For Preventing Contract Disputes

Contractual disagreements, including contract breaches and differing views regarding a contract’s interpretation, can quickly lead to legal proceedings. Litigation, in turn, has the potential to result in damaged partnerships, delayed business operations, and significant financial consequences. By adopting prudent, carefully considered strategies such as calm, objective decision-making and sound contract drafting, companies can effectively anticipate and manage contentions before they can substantially harm their firms. For additional information on the different practices for preventing contract disputes, schedule a consultation with a seasoned New York business litigation attorney from Schwab & Gasparini by calling their Syracuse office at (315) 422-1333, Albany site at (518) 591-4664, or Hudson Valley or White Plains locations at (914) 304-4353.

Understanding Contract Disputes

In the context of contract law, a “dispute” typically refers to an argument between contractual participants. Such disagreements may concern the agreement’s implementation, performance, or terms. Worth noting is that although many clashes can involve deal breaches, not all do; for example, if only a single party wishes to adjust an agreement or if there is a lack of consensus regarding how to interpret a particular clause, this might culminate in contractual rows.

Dispute Resolution Methods

The parties to a contract may choose to settle their grievances in many ways, including via discourse or through more formal mechanisms, such as litigation or alternative dispute resolution (ADR). Per the American Bar Association (ABA), ADR entails resolving a disagreement through procedures like arbitration, conciliation, settlement, or mediation without the case going to court. Sometimes, the means to be used for dispute resolution are specified in the contract itself.

How Do You Avoid a Contract Dispute?

Several ways of averting a disagreement concerning a business deal exist, such as drafting contract documents with attention to the precise use of language and watching out for the warning signs of a communication breakdown, such as a change in the tone of interactions related to the interpretation or fulfillment of contract clauses. Below are some additional examples covered in more detail.

Ensure Contract Clarity

One ideal way to protect all the parties associated with a contract is to craft the essential document carefully in the first place. If consensus never relies on partially documented or orally agreed terms, it is easier to prevent problems if relations between the participants break down since the presence of a comprehensive, minutely articulated, signed document makes it much more difficult for one party to bring into dispute what was originally agreed. 

Effectively drafted business agreements usually mention the following items:

• Payment terms, including frequency, payment amounts, and how to make them
• Delivery timescales
• A plan for resolving disagreements, such as whether to include mediators and arbitrators
• Expected quality and performance of the provided goods or services

Avoid Hasty, Uninformed Decision-Making

Contractual disagreements frequently arise and escalate due to rash decision-making and the failure of a participant to carefully consider their liabilities, obligations, and possible consequences before taking action. Notable examples include terminating an agreement without justification or accusing the other party of a breach when no violation of contract terms has taken place. Either action could have vast financial repercussions, such as damages for failing to fulfill a contract.

What Is the Most Common Method Used To Resolve Disputes?

The most popular disagreement resolution technique is negotiation. Simple but often effective, negotiation entails alternating exchanges between each party in the conflict to reach a solution that pleases everyone. Negotiation––with or without the assistance of lawyers––is normally the initial dispute resolution practice adopted, 

As a tool for remediating contractual disagreements, negotiation has these noteworthy characteristics:

• Confidentiality and privacy
• Voluntary
• Fast
• Cheap
• Possibility to enforce negotiated agreements in court
• Potential for a positive outcome for all participants
• Unstructured process
• Informal in nature
• No involvement of third parties is necessary

Find out how a New York business litigation lawyer can help firms with their legal issues and explore how to avoid contract disputes in greater detail by arranging a consultation with Schwab & Gasparini.

What Are the Methods of Resolving Contract Disputes?

If negotiation fails, the parties to a contract might resort to one of the following three additional procedures: mediation, litigation, and arbitration. Each of these options involves the use of third parties to help the contract participants overcome their impasse.

Mediation

In mediation, an impartial third party, called a mediator, assists the contractual parties in seeking a mutually beneficial solution. A mediator’s primary duties are as follows:

• Facilitating communication between the parties, such as by creating a friendly, respectful environment, highlighting the concerns and interests of all participants, and encouraging active listening
• Helping the parties reach an agreeable solution without making decisions or imposing resolution options.
• Safeguarding the confidentiality of the process for all involved
• Making sure all parties are aware of an agreement’s terms (assuming the participants manage to reach one)

Here are the benefits and drawbacks of utilizing mediation to solve business deal disagreements.

Advantages of Mediation

Mediation is a commonly employed contractual disagreement resolution procedure. This path to dispute resolution enjoys a high reputation in many industries, partly due to the process’s efficiency, cost-effectiveness, and confidentiality. As an added benefit, mediation allows for resolving business agreement conflicts without involving the courts, which can result in substantial savings of both time and money.

Mediation Disadvantages

That said, mediation also presents its own challenges:

• Not being legally binding and offering no guaranteed outcomes
• Possibly allowing a participant to have greater power than the other person or entity

Whether mediation is an appropriate conflict resolution technique in a particular contract dispute will depend upon the circumstances of the contract and the disagreement between the parties.

Arbitration

Participants involved in a disagreement over the interpretation of a contract’s terms or the criteria for their fulfillment can utilize arbitration. This technique entails submitting the case to an arbitrator. Similar in some respects to a mediator, the arbitrator is a nonpartisan third party. Unlike a mediator, however, the arbitrator will typically hear each side of the case, analyze the evidence, and make their own enforceable, binding decision.

Litigation

Litigation refers to the formal procedure of resolving a disagreement via the courts. Concerning contractual disputes, one party may opt to sue the other to acquire damages or compel the other litigant to fulfill the deal’s terms. While the ability to win definitive payment in damages can make this option appealing to contract participants who feel sure of their case or in instances where mediation has already been tried and failed, in general, litigation tends to be the least preferred of the three avenues to resolution due to its high stakes and often demanding time investment.

Benefits of Litigation

The advantages of utilizing litigation are as follows:

• Litigation is a structured process with clear rules in place.
• Potentially significant financial rewards are available (notably in the form of damages), and no participant has more power than their opponent.

Litigation Drawbacks

However, litigation has disadvantages too. Litigation downsides include the high costs involved, the fact that it is a public procedure, its time-consuming nature, and the extremely limited control that litigants have over what happens during legal proceedings.

How Do You Resolve Conflict Over Contracts?

Following the tips below can help resolve contractual altercations:

• Stay organized: At times of conflict, understanding your obligations, legal options, and rights can aid effective decision-making and negotiations. Collating the documents, information, correspondence, and evidence linked to the contractual contention can help a business team approach any disagreement over a contract’s terms from a place of clear thinking, ready to identify and solve problems as they arise.
• Compromise and focus on goals: Not all resolutions result in ideal scenarios for all contractual participants. In fact, this is unlikely. Be willing to compromise to improve the chances of getting an acceptable solution. Businesses can facilitate the swift ending of disputes by identifying the priorities that are and are not negotiable, emphasizing objectivity of perspective among the leadership team involved, and striving not to let emotions get in the way.

Contact a New York Business Litigation Attorney Today

Disagreements regarding business deals occur in numerous different sectors; as the Project Management Institute (PMI) notes, the frequency of such conflicts, paired with their relatively high cost when navigated through the court system, has led to an increase in non-litigation approaches to resolving contract disputes across the board. While litigation is still a commonplace response to impasses over contractual obligations, clearly outlining each participant’s deliverables, timelines, and duties can improve collaboration and communication between those involved in a binding agreement and mitigate contractual contentions.

Understand more concerning the various techniques for averting contract disputes and learn how a New York business litigation attorney can assist businesses with disagreements by reaching out to Schwab & Gasparini’s Syracuse offices at (315) 422-1333 in Syracuse, the White Plains or Hudson Valley locations at (914) 304-4353, or the Albany site at (518) 591-4664.

 

Tue Dec 26 2023, 12:00am