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3 ways to resolve a significant contract dispute

On Behalf of | Apr 4, 2023 | Civil Litigation

The terms of a contract help to establish what obligations businesses owe to one another. Organizations sign agreements with their vendors and service providers, as well as with their employees and landlords.

The point of a contract is to create an official record of an agreement between two entities. Contracts also help make business arrangements enforceable if either party violates the terms of a contract. In a breach of contract scenario, one party may have failed to do something required by the contract or may have taken steps that were prohibited by its terms.

If the parties to a contract do not resolve a breach-related matter amicably through direct communication or attorney-led negotiation, a breach of contract lawsuit may result. If the matter goes to court, a judge will have the authority to resolve the dispute in the way they view as appropriate based on both state law and the terms of the contract. These are the three most common ways that judges resolve contract disputes.

1. Awarding damages

Failure by a vendor or service provider could lead to financial losses for a business. Provided that there is clear proof that a contract breach occurred and there are financial or operational records affirming the losses incurred by the organization, a judge could award damages to a business harmed by the contractual failings of another party.

2. Ordering specific performance

A contract is only enforceable if a judge agrees that it is valid. However, a civil judge has the authority to issue a court order mandating certain actions on the part of either party. An order of specific performance from a judge could essentially put the weight of the courts behind a contract. If the other party still does not fulfill the agreement, they will be in contempt of court.

3. Terminating the contract

Sometimes, the contract breach puts an organization in a vulnerable position because it would still potentially have obligations to the other party. A judge can theoretically end the contract and thereby terminate any obligations between the two parties.

In many breach of contract scenarios, pending litigation may be enough to motivate the party in violation of the agreement to resolve the matter in a favorable manner. Other times, a judge will need to intervene to settle a contentious dispute. Recognizing when business litigation may be necessary for an organization’s protection can help executives and owners make better decisions about contract breaches. Speaking with an experienced legal professional can help to provide this clarity.