Parties to business contracts always start out in consensus but often hit discord down the road. Multiple issues can cause costly disputes, which can disrupt operations and strain business relationships. Whichever industry or field of endeavor is involved, certain types of contract disputes are commonplace. However, with careful drafting, many of these disputes can be avoided or mitigated. 

The following are some key causes of business contract disputes:

• Ambiguous language — Contracts should use precise language and define critical terms. Otherwise, parties may interpret terms differently, leading to misunderstandings. If a delivery timeline is stated as “as soon as possible,” one party may expect delivery within a week, while the other may anticipate a month. A well-drafted contract avoids generic or vague phrases and instead specifies measurable and agreed-upon standards.

• Vagueness in scope of work and responsibilities — Without precise descriptions of duties, obligations and performance standards, parties may disagree on who should perform what tasks and to what extent. This is especially common in service agreements, where the level of service can be subjective. To mitigate this risk, contracts should include a detailed, itemized scope of work section that leaves little room for differing interpretations.

• Unclear payment terms — Vague payment schedules or unclear invoicing requirements can easily lead to disputes over financial obligations. By clearly specifying payment terms such as amounts, deadlines, and penalties for late payments, parties can avoid misunderstandings and ensure that each understands their financial responsibilities.

• Not planning for the unforeseen — Disputes often arise when a contract has failed to include terms for dealing with such situations as regulatory shifts, market changes or economic downturns. In these circumstances, one party might seek to exit or modify the agreement due to unforeseen circumstances. By including clauses like “force majeure” and other contingency provisions, parties can anticipate how to address unexpected events rationally and amicably.

A contract should also include dispute resolution mechanisms. One type is mediation, which provides an informal setting in which parties can reach a mutually agreeable solution with the help of a neutral third party. Another is arbitration, which is a trial-like procedure but faster, cheaper and more confidential than going to court. In this way, a well-drafted contract not only reduces the likelihood of contract disputes but also ensures efficient, cost-effective resolution if they arise.

We at Garcia & Gurney A Law Corporation are proud to provide clients in or around Alameda and Contra Costa counties with effective representation for a variety of business law issues. Call us today at 925-468-0400 or contact us online.