Common Causes of Business Disputes
Probably the most common cause of business disputes involves products. If one party has agreed to supply a certain type and quantity of a product at a certain time or frequency and fails to deliver as promised, a dispute may arise. Party A’s business depends on selling the product, and Party B has failed to deliver the product as mutually agreed upon.
The same can occur with promised services. If Party A depends on Party B to provide accounting services and Party B fails to perform these services as promised, a dispute will likely result.
Another potential dispute can occur if one business associate, or partner, decides that they want out of the agreement. That person’s decision could cause a financial drain in terms of a buyout, or the departure might mean a vital piece of the operation is suddenly going to be gone. The other associates sense trouble, and problems arise.
Employees can also get involved in disputes with their employers. Employees may feel discriminated against or harassed at work, or they may find a non-compete pact they signed prevents them from finding work after they’ve left the company.
Disputes can be foreseen or anticipated when businesses are launched. Partnership agreements, contracts, employee agreements — all can include resolution procedures that are spelled out in detail. Even then, emotions can take over, and experienced legal advice and counsel will be needed.
What Are Contracts and Contract Disputes?
A contract doesn’t necessarily have to be written out in order to legally “exist.” Oral agreements can also reach the status of a legal contract, as can repeated behavior in a commercial sense, resulting in what is referred to as an implied contract. If Party A and Party B have been mutually performing their obligations for each other in a business operation long and often enough, an implied contract can be argued to exist. Therefore, a lot of business disputes boil down to a breach of contract.
A breach of contract has four basic elements:
- The existence of a contract
- The plaintiff’s adherence to the contract
- The defendant’s failure to perform duties as required by the contract
- The plaintiff’s suffering of damages due to the nonperformance of the defendant
Obviously, unless the contract is written out and signed, the first element can be disputed by the defendant. “We never shook hands on this” could be a rebuttal to the argument for an oral contract, or even for an implied contract. Or, “Sure, I supplied that product twice, but never agreed to anything beyond that.”
It’s best to get everything in writing to avoid disputes over who agreed to what, and also to provide mechanisms for dispute resolution. If one partner wants to leave, the partnership agreement can spell out steps for leaving the operation to minimize risk to the other partner(s). If delivery of products or services is involved, the type, quantity, and deadlines for delivery should be spelled out in clear terms.
If there is no written contract or agreement, then in order to sue for breach of contract, you’ll need to prove the existence of an oral or implied contract. This is where experienced legal counsel is essential.
Resolving a Business Dispute
In addition to civil lawsuits, the three most typical resolution mechanisms for a breach or dispute are mediation, arbitration, and dissolution.
The first step is for you to reach out to the other party and see if a negotiated resolution can be achieved. This is, of course, the most cost-effective and amicable solution. If this step fails, then you may resort to the other methods.
You can continue the negotiations by involving a third party in mediation, with discussions taking place with the help of a neutral mediator.
Arbitration is a step beyond mediation but usually has to be specified in a written agreement or contract in order to be invoked. Employees often are required to submit to arbitration for any dispute that arises. A written commercial contract may also spell out a requirement for mandatory arbitration.
The final and most drastic step, if all else fails (including a lawsuit), is the dissolution of the agreement. This is often called cancellation and restitution. The aggrieved party simply cancels the contract or agreement and returns to operations that existed prior to the arrangement.