What issues in a contract frequently give rise to dispute?

contract disputes

Sep 29, 2016

Contracts are legally binding agreements between two or more parties, which creates legal obligations to do or deliver certain goods or services from one party to another. Contracts, if not reviewed, adhered to or drawn up correctly with the help of a contract lawyer, can result in disputes between parties. In Ontario, disputes can be settled or resolved in court through the guidance of a litigation lawyer.

Understanding the issues in a contract that may give rise to dispute, will help your company lower its corporate liability.

Scope of Work

Specification is key when drafting contracts. Special attention should be paid to the amount of work being agreed upon. Your contract lawyer will help you to ensure that there are no potential loopholes, like “scope creep.” Scope creep becomes a contractual issue when the contract fails to specifically outline scope of work in relation to payment. When defining the scope of work, ensure you include as many details about limitations, revisions, and anything else relating to the work you expect to be done for the price being paid.

Liability Limitations

Liability limitation refers to a financial cap responsibility for each party in the event of a breach of contract. If a breach causes damages to one of the parties value above what is signed and agreed upon it can lead to dispute. In order to prevent this, consider all scenarios that might occur in relation to this contract clause. Both parties should carefully review and fully understand this clause before the contract is signed. If there is any worry or disagreement on the liabilities, amend them before the contract is signed to avoid future dispute.

Contract Interpretation

Different people, different interpretations. Each party in a contract is likely to read and interpret that contract differently and often in favour of themselves. The best way to limit differing interpretations is to ensure multiple people from each party read the contract, including a contract lawyer. Differences should be discussed before signing and amended if needed.

Price Changes

Business does not operate as straightforward as how it is laid out in a contract, and sometimes things happen that are outside both of the parties’ control. This is often how disputes over price arise. The cost of delivering a good and/or service from one party to the other can change due to an outside factor that could not be foreseen at the time of signing the contract. This can cause a dispute between parties: do you pay the regular price, agreed upon in the contract, or are you obligated to pay a higher price when asked?

The answer is in how important that relationship is to your company or business. Legally they must adhere to the contractually agreed upon price, but sometimes you must consider business over legality, and before you sign a contract with a party it’s important that you understand the type of relationship you’re entering into, so you know how to approach a situation like this if it ever does arise.

If a dispute over a contract does arise, your company will need to hire a commercial litigation lawyer. The Niagara litigation practice of Chowns Cairns law firm represents Niagara businesses in a wide range of litigation matters. Click below to learn more about the Chown Cairns law practice group.