Understanding Commercial Contract Disputes

Navigating your way through any dispute can be stressful, disruptive and damaging – and corporate disputes are no exception. Our dispute resolution team at AFG Law provide tactical and strategic advice to businesses and the individuals within them, protecting your rights, interests and reputations.

A commercial contract dispute occurs when there is a disagreement or conflict between parties involved in a commercial/business contract. Such contracts are legally binding, and all parties involved must meet their agreed contractual obligations. Commercial contracts are commonly established for the purpose of buying, selling, leasing, or exchanging goods, services, or property.

Within a contract, certain terms and conditions are laid out, such as termination rights and intellectual property, performance obligations, and compensation in the event of a breach of contract.

Commercial disputes are becoming increasingly commonplace. It is, therefore, essential that you seek the right legal advice as early as possible to minimise the impact on you and your business. We have experience in bringing and defending a wide variety of disputes for many different types and sizes of business. We pride ourselves on understanding what is at stake and what it takes to get the best outcome for our clients.

Our dispute resolution team take the time to understand each client's unique challenges and explore the most effective strategies to achieve their commercial goals. Recognising that every dispute and business is different, we provide tailored solutions designed to meet your specific needs.

Common types of commercial contract disputes

We have experience in disputes arising out of all types of commercial activity, including:

• Sale and supply of goods and services – Disputes involving the quality, delivery, or payment of goods and services.
• Agency, distribution, and franchise agreements – Conflicts involving rights, obligations, and termination of business agreements.
• Warranty and indemnity claims – Claims related to breaches of contractual warranties or indemnities in transactions.
• Retention of title – Disputes over ownership of goods until payment is made.
• Exclusion and limitation clauses – Issues concerning the enforceability of contract terms limiting liability.
• Restrictive covenants – Challenges over contractual clauses that limit competition or business activities.
• Misrepresentation claims – Legal actions arising from false or misleading statements that induce a contract.

Common Causes of Commercial Contract Disputes

It is important to have clear and well-drafted contracts to avoid disputes occurring in the first place. However, even when all necessary precautions have been taken, commercial contract disputes can still arise.

A breach of contract claim is typically the most common cause of a contract dispute. This is when one party fails to fulfil its contractual obligations. Breaches may include failing to deliver goods/services as agreed, or failing to make payments on time. Breaches of contract can vary in severity, from minor breaches affecting only a part of a contract to a material or fundamental breach which compromises the core purpose of the agreement.

Claims also arise due to misrepresentation, in which one party intentionally or sometimes unintentionally misleads the other into entering into the contract based on false information. Misrepresentation or genuine mistakes within a commercial contract can lead to disputes regarding the true validity of the agreement.

Late payments, partial payments, or even refusing to pay altogether can cause disagreements and put a strain on the parties involved in a contract. This can lead to financial difficulties, damage important business relationships, and even lead to potential legal action to recover owed amounts.

Sometimes, even with a written contract, misunderstandings can arise. This often happens when the language used is unclear or open to different interpretations. These ambiguities can lead to disagreements about what was actually agreed upon, causing friction and potentially escalating into a commercial contract dispute.

Disputes may also arise when one party seeks to terminate the contract prematurely, or when there are disagreements over the conditions under which termination is allowed. Often, contracts contain specific provisions outlining the circumstances in which either party can end the agreement, such as breach, failure to perform, or mutual consent. However, conflicts can emerge if one party believes the termination conditions have been met, while the other disagrees.

Resolving Commercial Contract Disputes

There are various avenues available to attempt to resolve a commercial contract dispute, including both Alternative Dispute Resolution (ADR) methods and more formal litigation.

The first step would often be to hold informal negotiation discussions with all parties to try and settle the dispute amicably with minimal disruption to business operations. Negotiation is all about open communication and working together to find a solution that everyone can live with. It's a flexible process where the parties involved directly discuss the issues and try to reach a mutually agreeable outcome.

Because parties are directly involved in the negotiation talks, they tend to have more control over the result. However, if negotiation doesn't lead to an agreement, there are other ways to resolve the dispute.

Mediation is another form of ADR in which an independent and impartial mediator facilitates discussions between the disputing parties in order to reach a mutually agreeable solution. It is important to note that the mediator does not make any legally binding decisions, but it is often a successful and cost-effective route for disputes to be handled.

The last avenue of ADR would be arbitration proceedings. Arbitration is a more formal type of ADR. It involves a neutral arbitrator who listens to the arguments and evidence presented by both parties. They then make a legally binding decision regarding the dispute.

If all ADR routes fail and parties cannot agree on a way forward following their commercial contract dispute, then the matter may progress to litigation. Taking the contractual dispute to court is a much longer and costly process. A judge will hear the case and make a legal ruling on the commercial contract dispute.

Remedies for Breach of Contract

When a commercial breach of contract occurs, the most common remedy is typically damages, in which the injured party is compensated for the losses they have suffered due to the breach of contractual terms.

Specific performance is another avenue through which parties may go down, requiring the breaching party to fulfil their contractual obligations as originally agreed. This is typically awarded when damages alone would be insufficient, such as in contracts involving unique goods or specialised services.

An injured party may also petition for an injunction order as a remedy for a breach of contract. An injunction is a court order that either compels a party to do something (a mandatory injunction) or prevents them from doing something (a prohibitory injunction). An injunction might be used to stop a party from breaching a contract, for example, preventing them from selling a product to someone else when they have an exclusive contract with another distributor.

In cases of extreme breaches of contract, misrepresentation or fraud, parties can have the contract legally terminated. Rescission allows the contract to be cancelled, restoring both parties to their pre-contractual positions as if the agreement never existed.

How AFG Law Can Assist with Commercial Contract Disputes

Our team of legal professionals at AFG Law provide comprehensive support to businesses facing commercial contract disputes, offering expert legal guidance to protect their interests and resolve conflicts efficiently.

We feel strongly about exploring cost-effective resolution strategies to avoid lengthy and expensive litigation. If a dispute cannot be resolved through alternative methods, our commercial litigators provide legal representation in arbitration or court proceedings, ensuring that our client's interests are fully protected.

Beyond dispute resolution, we also help businesses prevent future conflicts by drafting clear and enforceable contracts. Our expertise in contract law allows us to identify potential risks, review agreements, and incorporate effective dispute resolution clauses.

If you would like more information on our commercial contract dispute services, or wish to speak to a member of our dispute team, then please do not hesitate to get in touch with us today. We can be contacted via email at disputeresolution@afglaw.co.uk or you can call us on 01204 377600.