What Is Contract Litigation? | How to Avoid a Breach of Contract…

Anyone who is involved in any type of business is familiar with contracts. Having a solid contract gives businesses a healthy amount of protection because they are entering into a binding legal agreement. The parties who sign off on a contract are legally bound to adhere to the terms within. Contracts are applicable for all sorts of agreements. They cover a wide range of professional services, licensing deals, employment offers, insurance coverage, and much more. Whenever a contract is broken, or if the terms of the agreement are disputed, contract litigation may be required. 

What is contract litigation? It’s an area of law that involves interpreting the intention of a contract’s terms. Also, reviewing and determining the enforceability and legality of those terms. If a breach has occurred, it means figuring out the amount of damages either party is owed. Contract litigation may become a necessity due to the infinitely complex nature of business contracts. 

Specificity and Interpretation is the Key to Contract Litigation

What if just one aspect of a contract is susceptible to any kind of interpretation? It could open up an opportunity for a contract litigator to try and prove the unenforceability of the terms. How do you ensure the ultimate strength and longevity of a contract? By addressing as many specific circumstances as possible, within the relevant context of the agreement. It’s the extremely detailed complexity of contracts that can lead to the need for contract litigation. An experienced attorney’s responsibility is to appropriately interpret the intent of the terms. From there, if applicable, they’ll present a persuasive argument for or against that intent in court! 

In order to effectively create a contract that’s ironclad and binding, it must contain: 

• Offer 
• Acceptance 
• Consideration 
• Mutuality of Obligation 

The contract has to state what one party is offering the other party in exchange for what they desire from that other party. Rarely, the other party completely agrees with the offer – making it a contract. More frequently, the other party wishes to amend the terms, perhaps for their benefit, and submit a counter offer. For the offer to become a contract the parties must mutually agree to the terms and sign off on them. For a contract to actually be legally binding and enforceable, it needs to have consideration. That’s the benefit each party will receive from signing the contract. This could either be an agreement to do or not to do something that is or isn’t a legal requirement.

The Necessary Components of a Legally Binding Contract

For example, a contract could include a clause that states one party will not sue the other, even if they have the legal right to do that; or, that one party will provide a certain kind of service for a specific amount of money, though they aren’t legally required to. And, the parties have to agree to be bound by whatever terms are written in the contract – that’s the mutuality of obligation. Not every single contract has to be written, they could be oral or handshake agreements. But, contracts involving land, for instance, must be written. Obviously, oral contracts or verbal agreements are really hard to enforce, so a written contract is usually preferable. 

To enter into a contract, the parties are required to have the necessary legal capacity to do so. Any person signing a contract on behalf of a company has to have the legal authority to do that, for example. If someone is a minor, under duress, has a mental impairment of any sort, or otherwise is unable to comprehend the purpose of the contract, they don’t have the legal capacity to engage in a legally binding contract. In some cases, that capacity is determined by the court – if the court states that one of the parties didn’t have legal capacity, that can void a contract. Contracts can be voided for a number of reasons! In contract litigation, an attorney figures out which of the alleged reasons for voiding the contract may or may not be valid. 

Too many folks sign off on contracts without really considering the long term implications of what they’ve agreed to. As a result, the terms of the contract may not be precisely what they should be and can lead to litigation in the future.

Avoid a Breach of Contract Lawsuit!

At all costs, if you can try to avoid a breach of contract lawsuit! Breach of contract may occur for a bunch of reasons, such as: 

• Misidentification of the Parties
  • New businesses may plan to form an LLC in the future under one name, but later use a different name or never actually form one – if a contract was signed, this could lead to a breach because of the discrepancy of identification. Or, an inexperienced businessperson signs their own personal name, instead of as an officer of the company, thereby tacking on claims of personal liability. Having legal counsel guide you through the process can prevent these things from happening! 
• Personal Guarantee
  • When a personal guarantee is included in a contract, the person who signs the contract opens themselves up to be named if and/or when a breach of contract action is taken. This eliminates the intended protections provided by incorporation, which exists to indemnify an individual against a lawsuit. 
• Arbitration Clauses
  • Unfortunately, some folks believe that arbitration saves time and money. But, if a contract contains an arbitration clause that means the breach of contract case won’t be heard in court, which reduces a party’s legal rights and opportunity for appeal. Sometimes it’s worthwhile to go to court! 
• Jurisdictional Clauses
  • Having a clause that states a potential breach of contract lawsuit will be handled in one party’s particular favorable state jurisdiction may not be the best idea! That means the other party could have to find another attorney in a different state as specified in that clause. 

Contract Litigation May Be Required if a Breach Occurs

Contract litigation may be required if a contract is breached for any plausible reason! If one party alleges that a contract was breached, you’ll want to have an experienced contract attorney. A contract litigator can work on behalf of your business to prove the reason for the breach invalid, renegotiate the contract, restructure the terms, or reach a favorable settlement. More importantly, your contract attorney should protect you from any future lawsuits at the outset by ensuring the contracts you sign have terms that you actually agree to, both now and going forward.  

Are you looking to draft a new contract? Have you been accused of breaching a contract? Or, would you like to file a lawsuit against another party who failed to uphold the terms of a contract you signed? 

Whatever your contract litigation needs, our team at Stockman & Poropat, PLLC can help! Contact us today for a free consultation. 

Up next we will be discussing Flat Fee Contract Reviews.