Contract Disputes

A contract dispute happens when one or more parties to a contract disagree over or breach the terms, obligations, or execution of the contract. Civil litigation is the legal process of resolving such disputes through court or mutual release.

What is Breach of Contract?

A breach occurs when one or more parties fail to fulfill their contractual obligations. Breaches can be:

• Material Breach: A significant failure that undermines the contract’s purpose, allowing the non-breaching party to terminate the contract and seek damages.
• Minor Breach: A partial or less significant breach that does not void the contract but may still warrant compensation.

Types of Contract Disputes

• Non-Performance: One party fails to perform their contractual obligations
• Misrepresentation: False statements were made to induce one party to enter into the contract
• Disagreement over Terms: Parties interpret the terms of the contract differently
• Breach of Warranty: The breach of an express or implied promise within the contract

Civil Litigation in Contract Disputes

When negotiation and any alternative dispute resolution methods fail, parties may take contract dispute to court through civil litigation.

• Pleadings: The process starts with filing of a lawsuit (complaint or statement of claim). The defendant responds with an answer (statement of defense).
• Discovery: Both parties exchange evidence and information relevant to the dispute. This may include documents, emails and witness testimonies.
• Motions: Parties may file pre-trial motions, such as motions to dismiss, to limit issues for trial, or to seek a summary judgment if the facts are undisputed.
• Trial: If a dispute is not resolved through settlement, it proceeds to trial. Both parties present their cases, including evidence and witnesses, before a judge (and sometimes a jury). The judge or jury then makes a decision.
• Judgment: The court issues a judgment based on the findings. This may include monetary damages, forcing a party to fulfill their contractual obligations or cancelling the contract.

Remedies in Contract Disputes

• Damages: The most common remedy, where the court orders the breaching party to pay compensation to the non-breaching party.
  • Compensatory Damages: To cover the loss directly caused by the breach.
  • Consequential Damages: To cover additional losses indirectly caused by the breach.
  • Liquidated Damages: Pre-agreed damages specified within the contract.
• Specific Performance: A court order requiring the breaching party to fulfill their contractual obligations, typically used in cases where monetary damages are inadequate.
• Rescission: The court cancels the contract, and both parties are released from their obligations.

Defenses to a Breach of Contract Claim

The defendant may raise defenses, such as:

• Impossibility: It was impossible to perform the contract due to unforeseen circumstances.
• Fraud: The contract was entered into based on deceit or fraudulent statements.
• Duress or Coercion: The defendant was forced into the contract under threat.
• Lack of Capacity: The defendant did not have the legal capacity to enter into the contract (e.g., due to age or mental state).

Alternative Dispute Resolution (ADR)

Before or during litigation, parties often explore ADR methods, such as mediation or arbitration, to resolve their contract dispute without a full trial. These methods can be faster, less expensive and more private.

Enforcement of Judgments

Once a judgment is made, the winning party may need to enforce it if the losing party does not comply voluntarily. Enforcement may involve garnishing wages, placing liens on property, or seizing assets.