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3 mistakes that can lead to expensive contract disputes

On Behalf of | Jun 25, 2023 | Business Law

Contract disputes can ruin working relationships and cost businesses thousands of dollars to resolve. They are also a source of frustration for the parties embroiled in the disputes, as the whole intention of a contract is to enter into a clear and enforceable agreement with another person or a business.

The sad truth is that many people who sign contracts on their own behalf or as a representative of a business make mistakes during the contract negotiation process that directly contribute to the origin of disputes that may occur later. These are a few of the common mistakes that lead to conflicts about the performance of a contract.

Unspoken or unclear expectations

One of the biggest mistakes that people make when negotiating a contract involves the use of boilerplate documents. Instead of discussing every aspect of the agreement in detail, they print paperwork that they found online, add no real details beyond names and dates and then expect to have the same protection that they would after signing a customized contract. Whether someone expects a certain standard for the products or services that they will receive or wants to commit to a specific timeline, they need to very clearly communicate those expectations to the other party both during the negotiation process and then in the terms of the contract itself.

Forgetting to be flexible as necessary

Yes, contracts should absolutely include very clear and specific requirements of the parties signing, but there typically also need to be some provisions that allow for flexibility in the future. Force majeure clauses are an example, as they permit a delay in contract performance or the cancellation of an agreement when circumstances outside of someone’s control prevent them from fulfilling their agreement. Working in clauses that allow someone to delay contract completion or renegotiate terms because of supply chain issues are also examples of how someone can account for unpredictable challenges in the future.

Not inspiring any accountability

An attempt to handle contract disputes may sometimes lead to a very underwhelming resolution. Regardless of how inconvenient and frustrating one party’s breach of the contract was, the other party may have a hard time proving that there were any financial losses generated by that failure and may therefore be at a disadvantage when attempting to take legal action. Having clauses in a contract that impose penalties for non-performance or non-payment can be one way to ensure that there is compensation available if the dispute ends up going to court. It can also provide leverage during negotiations.

Drafting contracts that empower all parties in the event of a dispute can lead to a faster resolution if there are issues with the agreement later. Making this effort could even prevent disputes from damaging the working relationship between those who signed the contract. As a result, seeking legal guidance proactively is often a good idea.