WHAT SHOULD I DO IN A CONTRACT DISPUTE?
July 1, 2022
Business owners often cite contract disputes among the most stressful components of their work. Savvy business owners know that contract disputes can waste time, squander money, and create havoc by way of lawsuits. In this discussion, we explore common steps in navigating a contract dispute.
What is a Contract Dispute?
A contract dispute is any argument arising from a contract or agreement, oral or written. For example, a contract dispute in the context of a car dealer may take the form of a customer’s dispute regarding the condition of a recently purchased vehicle. A contract dispute in the context of a plumbing company may take the form of a customer’s allegations that the plumber performed the job incorrectly and the poor workmanship caused further plumbing problems or other home damage. A contract dispute in the context of a construction contractor may take the form of a general contractor’s allegation that the project owner failed to pay the general contractor in compliance with state laws and in compliance with contractual obligations. In all these examples, a dispute arose after at least two parties entered a written or oral agreement to exchange at least one a valuable item of consideration for another. Fights that arise from these arrangements are contract disputes.
Many self-reliant business owners first approach contract disputes by negotiating privately and directly with the customer, client, or consumer. Continuing our examples above, the car dealer may hear out the customer’s criticisms of the vehicle, offer documentary proof of the vehicle’s condition upon sale, and consider offering a repair, perhaps under the manufacturer’s warranty. The plumber may offer to examine the subsequent plumbing problem or home damage and offer to repair the work, perhaps at a reduced price or without any fee. The construction project owner may explain its reasons for delayed payment, offer proof of the date(s) of funding, and consider tendering outstanding balances, if any.
These examples convey several principles. First, the business must sincerely listen to the client, customer, or consumer’s complaints. Private negotiations will often fail before commencement if the business dismisses the complaints or demonstrates a halfhearted attempt to feign interest. Oftentimes, direct negotiations stand the highest likelihood of success if the business owner himself or herself speaks to the disgruntled consumer, client, or customer. The owner’s attention, time, and presence convey a sense of care that discussions with rank-and-file employees may fail to convey. Second, the business should explain its position while apologizing for the client, customer, or consumer’s troubles. This is a careful balance; the business must justify its position in a sympathetic way. For example, the car dealer may apologize for the customer’s malfunctioning air conditioning, explain that the company rarely experiences such troubles, offer documentation of the car’s condition upon arrival to the lot, and entertain potential remedies. Third, the business should offer reasonable efforts to remedy the dispute. Sometimes, the business may offer to cure the problem at reduced cost or without charge; other times, the business may offer to cure the problem at its regular cost or decline to cure the perceived issue. The best course of action is highly case specific and turns on the unique facts of the dispute.
Hire an Attorney to Negotiate
There are several reasons a business may choose to hire legal counsel in such disputes. First, the consumer, client, or customer may hire counsel before the business. This may prompt the business to hire counsel of its own. Second, corresponding through legal counsel often conveys to the customer, client, or consumer a perceived seriousness, which sometimes incentivizes the customer, client, or consumer to accept the remedy offered by the business or even to drop the matter altogether for fear of suit. Because the mere act of communicating through an attorney often sours relationships, however, the business should expect that amicable negotiations may quickly become hostile. Although negotiating through counsel may extinguish the dispute early, it may also prompt the client, customer, or consumer to hire legal counsel of its own.
When negotiating on a company’s behalf, the attorney may demand evidence of the company. This may entail proof of the vehicle’s condition, proof of timely construction contractor payments, or proof of a customer’s approval of a plumbing job or of the plumber’s job completion. Unlike lawsuits, generally public record, an attorney’s negotiations with the disgruntled customer, client, or consumer are private and not publicly accessible. Negotiations through legal counsel cannot guarantee resolution of the dispute and may lead the way to litigation.
Filing a lawsuit constitutes the last resort in resolving contract disputes. If the parties do not reach a private resolution satisfactory to one party or in a time frame satisfactory to one party, the dissatisfied party may choose to file suit. Businesses should bear in mind several principles regarding lawsuits. First, lawsuits are costly. Commercial litigators often bill on an hourly basis and demand a retainer. The business could quickly spend more in legal fees than it stood to lose in remedying the customer, client, or consumer’s complaint at a reduced fee or without charge. Second, litigation is always unpredictable. Lawsuits may produce an outcome even better than anticipated or much worse than anticipated. Businesses must bear in mind that any settlement paid to the customer, client, or consumer is in addition to the attorney’s fees. Therefore, the difference between the customer, client, or consumer’s demand and the business’ offer should ideally be great enough to justify the legal fees. When in doubt regarding whether to hire counsel, a prudent business should consult with an attorney.
Diab Law Firm, PLLC