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Contract Disputes: Understanding Your Rights and Resolution Options
An agreement that specifies certain legally enforceable rights and obligations, or “Contract,” forms the basis of countless business transactions and personal agreements. However, even well-written arrangements can lead to contractual disputes when interpretations differ, expectations are not met, or obligations are breached. Understanding contract disputes is crucial for businesses and individuals alike to protect their interests and seek favorable resolutions.
Let’s learn more about contract disputes, what it is, common reasons that lead to disputes, and how to resolve them successfully.
What is a Contract Dispute?
A contract dispute arises when two or more parties disagree about the terms, interpretation, or performance of a contract. These disputes can materialize in many ways, ranging from minor misunderstandings, disagreements over contractual language, and failure to fulfill those contracts to significant legal battles, sometimes ending up in court, as seen in countless contract dispute cases.
Common Reasons for Contract Disputes
Contract disputes can arise from a variety of factors, including:
- Ambiguous or Unclear Terms: Poorly drafted contracts with vague or contradictory terms create the opportunity for disputes.
- Breach of Contract: One or more parties may fail to uphold their obligations as outlined in the agreement.
- Force Majeure Events: Unforeseen events or changes in market conditions can make fulfilling contract terms difficult or impossible.
- Disagreements Over Payment: Disputes often relate to the timing, amount, or conditions of payment.
- Performance Issues: One party may be dissatisfied with the quality or timeliness of the other’s performance under the contract.
Contract disputes, if handled without proper communication or resolution, can result in significant losses for all parties involved. This is especially true in commercial contracts, where contractual and financial risks are often greater. In certain cases, the disputing parties may need to involve a legal professional or consider alternative dispute resolution methods like mediation.
Who Can Dispute a Contract?
Any party that is involved in the contract has the right to dispute. They can do this if they believe their rights have been violated or the terms have not been met. Additionally, disputes can also arise between third parties who may be affected by the contract, even if they were not original signatories.
Common types of parties who can dispute a contract include, but are not limited to:
1. Contracting Parties
The primary parties involved in the contract. They have the right to dispute the contract if there are breaches, disagreements, or other issues pertaining to the contract.
2. Assignees and Transferees
Under certain contractual agreements, a party may assign or transfer their rights or obligations to a third party (assignees or transferees). As a result, this third party possesses the rights that the contractual party has and can raise a dispute if necessary.
3. Third-party Beneficiaries
Third-party beneficiaries refer to individuals or entities that are not parties to the contract but may benefit from or hold obligations under it. A third-party beneficiary can dispute the contract should they have a direct interest in the contract’s subject matter.
4. Guarantors
A guarantor is an individual or entity that guarantees performance for one of the contracting parties, usually in the form of payment or financial support. Guarantors would have the legal right to dispute if issues arise related to the performance, payment, or as detailed within the contract.
Approach to Resolving Contract Disputes
The process for resolving disputes may differ depending on the details of individual contracts. Some may state that disputing parties resolve their disagreements through the court of law, while others may simply negotiate, mediate, or conciliate without resorting to litigation.
Below are the general steps involved in disputing a contract:
1. Review the Contract
When a dispute arises, first and foremost, carefully examine the contract’s terms, paying attention to any dispute terms, obligations, and remedies regarding dispute resolution.
2. Document the Issue
Gather relevant evidence to support your claim, such as emails, invoices, or other documentation.
3. Initial Communication with the Other Party
Attempt to resolve the dispute informally by contacting the other party in writing and outlining your concerns.
4. Negotiation
If direct communication fails, parties may consider negotiating a mutually agreeable solution. This may involve compromise on both sides.
5. Mediation or Conciliation
Mediation involves a third party called the “mediator,” who facilitates discussions and helps both parties reach a settlement. Oftentimes, the mediator is also a subject matter expert who would have a deeper understanding of the issues in question. Having a mediator could help parties come to an agreement easier.
Conciliation is another method that involves a third party. In this process, a conciliator will facilitate discussions between the parties in conflict while also suggesting potential solutions for consideration. Additionally, the conciliator is usually the one who makes the final determination and develops the settlement agreement.
6. Arbitration
In some instances, certain contracts may include arbitration clauses as a means to resolve disputes through arbitration rather than litigation or other methods. Arbitration is where a neutral party, generally an arbitrator who is an expert in a particular area of dispute, maintains impartiality and is not under either party’s influence.
If both parties agree to the arbitral tribunal award, it is considered a completion of the proceeding. The arbitrator will then make a binding decision called the “arbitration award,” which is enforceable by law.
7. Litigation
Parties may choose to pursue litigation by filing a lawsuit in a court of law. However, court proceedings can be a lengthy process, taking months or years to complete. On top of that, there are numerous costs involved in it. So, many would only resort to litigation if other contract dispute resolution fails.
Seek Legal Guidance for Contract Disputes
While minor contractual disagreements may be resolvable without legal intervention, complex disputes often warrant the expertise of an attorney. A lawyer or expert arbitrator can provide guidance on your rights, interpret contractual language, and represent you in any dispute resolution process. In this regard, THAC, a dispute resolution center in Bangkok, can help you secure the best possible resolution for your dispute.
THAC: International Arbitration and Expert Mediation Services
As an international arbitration institution, THAC specializes in providing effective and impartial dispute resolution services. Our team of seasoned arbitrators and mediators brings a wealth of experience to the table, ensuring that your business disputes are handled with the utmost expertise and professionalism.
If you have questions about our arbitration services or any other legal services, please get in touch with us at:
Email: [email protected]
Call: +66 (0)2018 1615
THAC is looking forward to helping you.
