Understanding how to dispute a contract is easier than it sounds. Every business will come across contract disputes, though it isn't always clear what steps need to be taken. In this article, we'll provide a thorough guide on how to dispute a contract legally in the UK. We'll deep dive into the full process, covering:
What a contract dispute is
Types of disputes
How to dispute a signed contract
Alternative dispute resolutions
What is a Contract?
Contracts are legally binding agreements which are agreed between two parties. The contract is enforceable by law and is useful to help define the rights and obligations of the parties involved. A contract helps to cement that relationship, offering a valid agreement between the parties regarding a sale, service or even an exchange of goods.
What is a Contract Dispute?
A contract dispute is a disagreement between two or more parties involved in a contractual agreement. This disagreement can stem from various reasons, including breach of contract, misinterpretation, fraud, or even misinterpretation. You can typically use a commercial solicitor to help with commercial contract disputes.
What Can Cause Contract Disputes?
Contract disputes can often be mitigated in the contract drafting stage. However, disputes can be caused by a variety of factors like:
Misinterpretation: Parties may have different understandings of the terms or provisions of the contract. This can lead to disagreements about rights, obligations, and expectations.
Breach of Contract: One party may fail to fulfil their contractual obligations. This could involve not delivering goods or services as promised, not paying on time, or violating other terms of the agreement.
Force Majeure: Unforeseen events or circumstances beyond the parties' control can prevent them from fulfilling their contractual obligations. Examples include natural disasters, pandemics, or government actions.
Fraud or Misrepresentation: One party may have deceived or misled the other party during the negotiation or formation of the contract. This can lead to disputes if the contract is based on false information.
Dispute Resolution Clauses: The contract itself may contain specific clauses outlining how disputes should be resolved. If these clauses are unclear or ambiguous, they can themselves become a source of contention.
Changes in Circumstances: Changes in the circumstances of the parties or the industry can make it
difficult to fulfil the terms of the contract. For example, a sudden increase in the cost of materials could make it difficult for a contractor to complete a project at the agreed-upon price.
These are just a few common factors that can lead to contract disputes. It's important to carefully review and understand the terms of any contract before signing it.
8 Types of Commercial Contract Breaches
A contract breach occurs when one party fails to fulfil their obligations under the terms of a legally binding agreement. There are eight types of contract breaches, each with its own legal consequences:
Material Breach: This is a substantial violation of the contract that defeats its purpose. It is so significant that the non-breaching party is deprived of the benefit they bargained for. For example, a seller failing to deliver a promised product would be a material breach.
Minor Breach:This is a less severe violation that does not substantially impair the non-breaching party's ability to enjoy the benefits of the contract. While a minor breach may entitle the non-breaching party to some remedies, it generally does not excuse them from performing their obligations under the contract.
Anticipatory Breach:This occurs when one party indicates before performance is due that they will not fulfil their contractual obligations. This can happen through express statements, actions, or circumstances that make it clear that performance will be impossible or unlikely.
Repudiation: This is a type of anticipatory breach where one party explicitly refuses to perform their contractual obligations.
Failure to Perform:This is a straightforward breach where one party simply fails to fulfil their contractual obligations within the specified time frame.
Breach of Warranty: A warranty is a guarantee or assurance made by one party to another regarding the quality or performance of goods or services. A breach of warranty occurs when the goods or services do not meet the promised standards.
Breach of Condition: A condition is a fundamental term of a contract that must be strictly complied with. If a condition is breached, the non-breaching party may be entitled to terminate the contract and seek damages.
Breach of Covenant: A covenant is a subsidiary term of a contract that is not essential to its overall purpose. A
breach of a covenant may entitle the non-breaching party to damages, but it generally does not justify termination of the contract.
How to dispute a signed contract
Disputing a signed contract can be a complex process, and it's often advisable to consult with a corporate solicitor or legal professional first. However, here are some general steps to consider:
Review the Contract: Carefully examine the contract to identify the specific terms or provisions
that you believe are unfair, misleading, or breached.
Gather Evidence: Collect any evidence that supports your claims. This may include emails, letters, documents, or witness statements.
Attempt Negotiation: Try to resolve the dispute amicably through negotiation with the other party. You may want to involve a mediator to facilitate the process.
File a Complaint: If negotiation fails, consider filing a complaint with the appropriate board. You will need to
follow the specific procedures and deadlines outlined in your jurisdiction's laws.
Seek Legal Counsel: It's highly recommended to consult with an attorney who specialises in contract law. They can provide guidance on your legal rights and options, and represent you in court if necessary.
Remember that disputing a contract can be time-consuming and stressful. It's important to approach the process with patience and persistence.
The Role of Mediation and Arbitration
What Is Mediation?
Mediation is where a neutral third party facilitates discussions to reach a mutually acceptable solution. This is often a good way to avoid legal fees from taking court action. Mediation can help to resolve disputes regarding the legally binding contract. There may be miscommunication over the terms of the contract. Mediation can make clear the contractual expectations of the other party.
What Is Arbitration?
A cost-effective alternative to court proceedings, arbitration is often a quicker process to a solution. In this case, a neutral individual looks at the situation from both sides and makes a legally binding decision on the dispute. This is a benefit when the subject matter is complex. Both parties will show evidence and the arbitrator will make the decision.
Taking Legal Action: The Court Process
If your solicitor thinks you have a viable breach of contract claim, they'll guide you on your options. Here's a quick snapshot of the entire process.
Filing a Claim
If you do decide to take legal action, you'll have to do the following when you file a claim:
You will have to prepare the necessary documentation for filing the claim.
You will have to fill out an N1 form. You will need to write the details of the claim and the amount you are seeking.
You will need to provide supporting evidence such as the contract and any witness statements.
You will need to pay the required fees which vary depending on whether it’s the High Court or County Court, and the claim amount. Claims up to £300 are a £35 fee, whilst a fee of £10,000 for claims over £200,000.
You then need to submit the claim which you can do online or via post.
Court Proceedings
During the court case, there will be the following:
A case management hearing will first take place which will allow the judge to set a timeframe and give directions.
Both parties will then have to gather and provide evidence such as reports, contracts and any witness statements.
The final trial will then occur which will include the opening statements, the presentation of evidence and any witness statements. It will also often include expert testimony before the final statements.
Court Orders and Judgments
Here are some of the possible outcomes:
There could be a court order for damages which will require the party to pay the other party damages.
The judge may declare specific performance which will see the party required to complete the terms of the contract.
An injunction could be ordered which could order the party to follow up with the terms of the contract.
If the losing party does not agree with the judgment, the party could appeal this. The injured party could seek enforcement of damages or an injunction. The breaching party could declare bankruptcy if they can not pay the damages.
FAQs
What is an example of a contract dispute?
There are lots of commercial examples. For example, if a construction company agrees to build a house by a certain date for a fixed price. If the house is not completed on time or exceeds the agreed-upon budget, this could lead to a contract dispute.
Can a signed contract be disputed?
Yes, a signed contract can be disputed. Even if a contract is signed, there are circumstances under which it may be challenged or disputed.
What are three different ways to resolve a contract dispute?
The three main ways to resolve a contract dispute are negotiation, mediation and arbitration.
Conclusion
When you need to dispute a contract, you should first review the contract. You can then attempt negotiation with the other party. If this can’t occur, you should seek advice and potentially even consider enforcing a court judgment. This can be a costly process, though could lead to damages.
You can also consult with Lawhive’s contract law experts and commercial contract solicitors for personalised advice on enforcing a contract. They can help discuss with you your contractual rights as a business and how to resolve disputes without going to court.