From shareholder agreements to employment agreements and contracts with vendors and customers, contracts are central to the establishment, operation and growth of almost any business. A carefully-negotiated and well-crafted contract will set expectations, establish responsibilities and provide appropriate remedies to protect an aggrieved party in the event of a default.
Unfortunately, even the most airtight contract cannot physically prevent a party from failing to meet its obligations. For large companies in particular, contract breaches are a fact of life. Some of the most common contract breaches and contract-related disputes include the following:
Four Common Disputes Arising Out of Business Contracts
1. Breach of Payment or Performance Obligations
When you boil them down, most business and commercial agreements cover a pretty basic concept: If Party A does what it says it will do, then Party B will pay an agreed-upon amount. Whether this involves renting a commercial space, developing custom software, supplying a product, or providing administrative services or maintenance, in the end one party has to perform and the other has to pay.
Of course, business relationships are rarely this simple, and most contracts will include a variety of conditions, service level requirements or other appropriate controls designed to protect both parties' expectations (assuming a fully-negotiated agreement). As a result, allegations of deficient performance and issues relating to payment obligations are at the center of many contract-related disputes. In these types of cases, getting to the bottom of the terms of the agreement becomes essential to determining each party's rights.
2. Breach of Non-Competition or Non-Solicitation Obligations
There are many legitimate reasons for contracts to contain non-competition and non-solicitation covenants. These provisions allow for the sharing of confidential and proprietary information (such as customer lists), while still protecting the owner of the information against having its own intangible assets used against it. In cases involving breaches of non-competition and non-solicitation covenants, it is essential to act quickly to protect your rights.
3. Breach of Confidentiality or Data Security
While confidentiality clauses have been around for a long time, we are now seeing data security clauses with increasing frequency as well. These clauses can run the gamut from short and sweet to extraordinarily complex, and the extent of a party's confidentiality and data security obligations can vary greatly depending on the nature of the services being provided and the information being disclosed. Like non-competition and non-solicitation clauses, if you need to enforce your counterparty's confidentiality or data security obligations, you need to take aggressive action as soon as possible.
Fraud claims can take a number of different forms, and do not necessarily have to arise out of the express terms of an agreement. For example, one type of fraud claim is known as "fraud in the inducement," which essentially means that one party convinced the other to enter into a contract under false pretenses. However, there are standard contract clauses (called "integration" clauses) that can prevent these types of fraud claims. As a result, if you believe you may have a claim for fraud, you should speak with an experienced business litigation attorney to find out if you have a legitimate cause of action.
Schedule a Consultation With a Fort Lauderdale Business Litigation Attorney
If you are facing a business contract dispute and would like to speak with an attorney, please contact us to arrange a confidential consultation. We're here to help, so call (954) 767-9662 or contact us online to schedule an appointment today.