06 Oct

De-mystifying Contract Disputes

What are contract disputes?

With contracts being at the helm of any commercial activity, disputes are bound to occur. Therefore, a contract dispute is common during the course of a commercial activity. The bone of contention usually occurs due to a difference in interpretation of the contract. The disputes can arise between suppliers and retailers, contractors and sub-contractors, in between parties or between parties to a land contract or joint venture agreement. At the core, contract disputes can occur due to a breach in the terms of a contract. The disputes can occur among any kind of agreements like Service agreements involving contracts for the supply of goods and services or contract to render a particular service; Contracts relating to lease, sale or purchase of land and property, Construction contracts, Government contracts, Finance and loan agreements etc.

Factors to be kept in mind while assessing a contract dispute.

There are various factors that one needs to keep in mind when assessing a contract dispute. Some of them are discussed below:

1-Identifying the Dispute clause in the Contract

Every contract has specific terms that have been drafted in. Hence, the troubleshooting term must be and worked in accordance with the overall contract in order to resolve the dispute.

2-Grounds of Dispute

The grounds for the occurrence of a dispute must be identified. This is the first step in dispute resolution. If the standard terms of a dispute are not established, one must seek to plug any existing loopholes.

3-Effect of oral agreement in a dispute

Certain contracts contain oral agreements. The lack of evidentiary value essentially leads to a dispute. Therefore, parties should avoid oral commitments or ensure that every oral agreement is made part of the agreement.

4-Presence of limitation of liability of parties

A limitation of liability clause in a contract curtails the extent to which a party can be held liable. This plays a significant role in the dispute resolution process.

5-Dispute Resolution Clause

The recourse adopted by parties to settle the disputes is of prime importance. The recourse must spell a ‘win’ for all parties involved. Also, the mode of Dispute Resolution should be specified in the Agreement to avoid confusion and save time.

Now that we have looked into the factors to be kept in mind while assessing a contract dispute, one must delve into the modes of settlement of contract disputes.

Mode of Dispute Resolution:-

An effective mode of dispute resolution must be chosen to settle the dispute. They are;

  • Negotiation: Negotiation is considered to be one of the easiest forms of dispute resolution. It is the most cost-effective and smooth mode of negotiating a dispute without the need for formal mediation.
  • Mediation and Arbitration: Mediation or Arbitration is another option available to the parties in case negotiation fails. Mediation and arbitration are usually considered as one of the cheaper and quicker ways to resolve disputes as compared to the Courts. Arbitration proceedings involve the acceptance of evidence, questioning of witnesses and deciding appropriate remedies.
  • Court proceedings: In case an issue cannot be resolved by ways of negotiation, mediation or arbitration, the Court can try disputes falling under its jurisdiction. But that, however, depends on the monetary valuation of a claim made by either party.

So, contract disputes can occur quite frequently during the course of a business and hence, they must be dealt in a proper manner.

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