As legally enforceable documents, contracts take the uncertainty from business transactions by providing a structured agreement and expectations between parties. However, disputes among the parties to a contract are commonplace and can be costly and time-consuming for all.
Understanding the common causes of contract disputes can help your business take preemptive measures and mitigate the associated risks. Below are some of the common factors that frequently trigger contract disputes.
1. Lack of clarity or vagueness in the contract language
Contracts that lack clarity or have ambiguous terms can lead to disagreements. Vague clauses can create confusion and uncertainty, leading to disputes over the interpretation or performance of the contract.
2. Negligence or fraud
If one party provides false information, conceals important details or misrepresents facts during contract negotiations, it can lead to disputes as it undermines the integrity of the contract.
For example, one party may lie about their qualifications, deliver substandard goods or services or fail to disclose material information. Negligence or fraud can result in a breach of contract, loss of trust and legal liability.
3. Failure to deliver or execute the contract
When one party fails to fulfill its obligations as outlined in the contract, it constitutes a breach of contract. This can include non-payment, late delivery, failure to perform specific tasks, or violating agreed-upon terms and conditions.
It could be because of unforeseen circumstances beyond the control of either party, frustrations by one party or just plain incompetence. Either way, breach of contract is a common reason for disputes among contracting parties.
4. Changes in requirements
Variations to the original contract regarding the scope of work or requirements also give rise to disputes. The parties may disagree on various issues, including additional costs, timeframes or responsibilities.
Staying ahead of trouble
Contract disputes can arise from many other causes, but awareness and careful consideration can help minimize the chances of occurrence. Drafting clear and comprehensive contracts and addressing potential pitfalls during contract negotiations can go a long way in protecting your business interests while saving you time and money.