We’ll put this out there: besides your products and services, one of the most important things your business can have going for it is a solid handle on its contracts.

No, you probably didn’t get into business to worry about service contracts, non-disclosure agreements, or any of the other many contracts that companies deal with. 

Nonetheless, contracts like these are vital to your success. And they’re especially important in the case of business disputes and litigation.

But what does a valid contract look like, and what are your options in the event of a business dispute based on a breach of contract?

Understanding the importance of contract clarity 

Contracts are an essential component of business. They clarify roles and expectations in any transaction and ensure that both parties know the terms and conditions of their business relationship. 

A clear contract will outline the who, what, when, where, and sometimes how of a transaction. 

• Who: What parties are obligated to fulfill the terms of the contract?
• What: What are the primary objectives?
• When: Is there a time by which these activities have to occur? What are the terms and conditions for not meeting the timeline established in the contract?
• Where: Are either party obligated to fulfill the contract in person or remotely?
• How: What are permitted activities within the confines of the contract? What activities are prohibited? What defines success for contract fulfillment?

Contracts are legal documents that provide recourse if one party is found to be in breach of contract. So, if a clause is unclear or vague, it may be worth clarifying, negotiating, or consulting a business contract attorney about how it should be interpreted. 

When are business contracts legally enforceable? 

Business contracts are considered legally enforceable once certain parameters are met, including:

• Both parties must have consented to the contract.
• Both parties could consent (they were not minors, had the mental competency to understand what they were signing, and could legally sign the contract).
• The contract itself complies with all local, state, and federal laws.
• Both parties have signed the agreement. 

So, when would a contract not be legally enforceable? In general, the following contracts may not be easily enforced:

• If a contract violates a law.
• If the consequences of contract breach are unjust, to the point where it’s evident to the court that it is absurdly punitive.
• If an error in the contract has a major impact on one party’s ability to fulfill the contract terms.
• If an unforeseeable force prevents contract fulfillment (e.g., a tornado destroys your warehouse and equipment).

That said, even if a contract fulfills every requirement for legal enforcement, if it’s poorly written or unclear, then you may have difficulty enforcing the contract. That’s because unclear contracts create ambiguity and leave room for interpretation.

As such, it’s important to ensure any business contracts are thorough, clear, concise, and reviewed by legal professionals to help avoid misinterpretations or later disputes. 

Common types of business contract disputes 

There are a few different types of common contract disputes.

Intellectual property disputes

An intellectual property (IP) dispute may occur if there is a disagreement over the use, ownership, or infringement of creative work protected by IP laws. This dispute typically involves trademarked items such as logos, slogans, trademarks, and licensing agreements and can become quite technical. 

Employment disputes

Employment contract disputes involve a disagreement between an employer and an employee regarding working conditions, wages, discrimination, or wrongful termination. 

Breach of contract or breach of commercial obligations

Breach of contract occurs if one party fails to perform the duties outlined in a business contract, whether failing to deliver goods, non-payment, or failing to abide by the standards laid out in the confidentiality contract. 

Breach of partnership agreements

Similar to a breach of contract, a breach of partnership dispute can occur if one partner fails to abide by the terms of a partnership agreement, such as profit-sharing or not fulfilling their responsibilities as outlined in the contract. 

What happens when you need to litigate? 

If you are contemplating or facing litigation for a contract dispute, remember that there are multiple ways to resolve business disputes, some of which may take less time and money than appearing in court. 

Mediation and arbitration are two methods of alternative dispute resolution.

Mediation is generally considered a more amicable approach to resolving contract disputes. It can be a strong option if you want to maintain a business relationship and resolve matters quietly. Mediation requires that both parties be willing to participate in an open dialogue and find a reasonable solution to the issue at hand. Parties are guided by a neutral third-party mediator, and the mediation is generally confidential to preserve privacy. 

Arbitration is similar to mediation in that it maintains confidentiality and occurs outside of the public court. However, arbitration is generally considered more efficient. The arbiters, rather than judges, can be subject matter experts specialized in certain topics. The arbiter makes the final decision regarding the dispute, and their decision is legally binding. Arbitration also has fewer opportunities for appeal, which is important to remember. 

If neither mediation nor arbitration is appealing or would work based on the circumstances, then litigation may be the best option. 

Litigation is often the most time-consuming way to resolve business disputes. It may also involve specific filing deadlines based on state and federal laws and require steps before filing suit to show a good faith attempt at dispute resolution. 

Whether involved in mediation, arbitration, or litigation, trusted legal counsel can help you prepare, understand your options, and take the best course of action for your circumstances. 

Learn more from an experienced Texas business attorney 

Whether you want to create tailored business contracts that minimize the chances of litigation or find yourself in a business contract dispute, an experienced business attorney, such as those at the Law Offices of Shann M. Chaudhry, ESQ., can help you safeguard your business interests. 

Contact our offices today to schedule a consultation and learn how we can protect your business.