Contract disputes are among the most common legal problems for individuals and businesses. This introduction explains the basics and the practical steps that can help resolve a dispute.
What is a contract?
A contract is a legally binding agreement between two or more parties. In general, it requires an offer, acceptance of that offer, something of value given in exchange (known as consideration) and an intention to create legal relations. Many contracts do not need to be in writing, although some, such as contracts for the sale of land, do.
What counts as a breach?
A breach happens when a party fails to perform their obligations under the contract without lawful excuse. Common examples include:
- Failing to pay for goods or services
- Delivering late, or not delivering at all
- Providing goods or services that do not meet the agreed standard
- Ending the contract early without the right to do so
What remedies are available?
The most common remedy is damages: money intended to put the innocent party in the position they would have been in if the contract had been properly performed. In some situations, the innocent party may also be entitled to end the contract, or a court may order a party to perform its obligations.
You are generally expected to take reasonable steps to reduce your losses. This is known as mitigation.
Practical first steps
- Gather the contract documents, quotations, terms and conditions and key correspondence.
- Write down a clear timeline of what was agreed and what went wrong.
- Raise the issue in writing with the other party and give them a chance to put it right.
- Avoid withholding payment or ending the contract without advice, as this can put you in breach.
- Consider whether negotiation or mediation could resolve the dispute.
Time limits
A claim for breach of a simple contract must generally be issued within six years from the date of the breach. For a contract made by deed, the period is usually twelve years.
Find out more about contractual disputes, or get in touch to discuss your situation.
