15 Proven Ways to Avoid Contractual Disputes

Contractual Disputes

Contracts are usually written in a way that lowers risks of breaches and assigns responsibility to a particular person if a dispute were to occur. The truth is that even the best-written contracts can result in unwanted and lengthy disputes. This could occur due to misunderstanding or poor performance from either party or simply incorrect interpretation of provisions. Of course, these aren’t the only reasons why contractual disputes arise. Thankfully, many techniques exist that can help alleviate these types of situations. Here are 15 of the most popular.

15 Ways to Alleviate Disputes in Contracts

Merely leaving a contract to run its course or not putting the right measures in place to avoid disputes can result in a complicated and stress-inducing situation. But it doesn’t need to be this way. By following these 15 ideas, you can better ensure your contract runs smoothly, both parties remain happy and no time is wasted unnecessarily.

  1. Negotiate Well. Unfortunately, some firms are set on an end goal of simply trying to get the best deal possible using deceitful practices. If you happen to see such signs during negotiation, our advice would be to run while you still can. So, which warning signs should you look for? A lack of flexibility or sheepish hiding of information are two common ones. While making unscrupulous demands is another. The best types of contracts are fair for all parties and are unlikely to result in future disputes.
  2. Be Punctual and Communicate Well. Both sides of the contract must always act in the best intentions. After all, once a contract is signed, there’s no going back. Both sides should try and meet deadlines, including payment deadlines, and always be punctual not least as this fosters a healthy working relationship between both parties. In other words, if a dispute did arise, the already strong values put into place wouldn’t cause as much friction. It’s common for one party in a contract to avoid presenting problems to the other side. This causes things to go downhill pretty quickly, escalating the issue by making it even more challenging to resolve. In other words, communicate all the time openly, because it makes life easier for everyone.
  3. Have the End in Sight. One of the most common reasons why contract disputes occur is when one party attempts to micromanage the other. Or, when a highly detailed or unnecessarily cumbersome contract is established. For the best chances of success, use agile and outcome-driven agreements with a clear pathway to the end. As a result, problems are less likely to happen that could dispute into something much larger and more problematic.
  4. Automate. Contract disputes can often be resolved easily and quickly by automating some part of the contracting process. Specifically, an online system can be used to manage an entire contract portfolio, milestones and deadlines. It can also measure progress made quickly. Admittedly, new technology can prove challenging and a learning curve for many. However, using antiquated methods is more likely to result in problems, such as more human error.
  5. Don’t Forget Reasonable Recourse. For complex contracts, things are likely to go wrong at some point. This also tends to be the case for long-lasting or international agreements as well. As a result, contracts of this nature should always feature clauses that include recourse if ever a dispute arose. Specifically, the right language should be used so that other parties have the appropriate guidance. Consequences of non-compliance should be outlined, and advice should be provided to assist arbitrators or judges in addressing disputes.
  6. Write All Terms Down. Relying solely on a handshake or ‘gentleman’s agreement’ is not uncommon when contracts are established. While this does work most of the time, problems can quickly escalate when a dispute occurs. All terms should be written down on paper then agreed upon by either party.
  7. Set Quality Expectations. Standards needed for successful delivery should be outlined in contract terms which should be clearly defined from day one. Both parties should be fully aware of their obligations. One thing you might want to include is the ability to inspect things beforehand so that if a problem did occur, the right action could be implemented to remedy it.
  8. Include Rights for Early Termination. Sometimes, early termination is possible with a contract as long as the relevant party provides sufficient notice, and the agreement allows for this. Circumstances and evidence for why this is needed should also be provided. In other words, if you want to avoid a possible lengthy contractual dispute at a later date, be sure to include early termination rights.
  9. Keep Records. Be sure to hold onto all written correspondence you have with the other party as the contract progresses. Also, keep all documentation for at least six years after the contract ends. If a dispute were raised, at least you’d be in a better place to defend adverse claims from a third party or partner.
  10. Seek Legal Advice. You might choose to do this just as the contract is kicking off, or during the contract as needed. In either case, it will help protect your position if a dispute is raised. Then the client can consider their options or alternatives.
  11. Use Alternative Dispute Methods. Litigation can not only be time-consuming, but potentially costly as well. But it needn’t be this way when alternative resolution can be used. This is both a cost-effective and quicker way to resolve disputes than using traditional legal proceedings. In other words, before conflicts lead to things like court action, consider the alternatives.
  12. Agree on Liability. If one party breaks their side of the agreement, the liability can either be excluded or limited. However, this should only be enforced once all other factors have been considered. You might want to include provisions for possible losses, even if they are a direct result of the other party breaching the agreement. Ultimately, nothing can be recovered unless this is included directly in the contract.
  13. Define Payment Obligations. Let the other party know when payments are due, and if they have to pay a fine for late payment. You might also want to consider circumstances that would allow you to suspend or terminate the agreement by creating a payment dispute procedure. Or for undisputed amounts, specify a partial payment.
  14. Allow for Change. Naturally, circumstances within a contract are susceptible to change over time. Customers look for more competitive pricing while suppliers might need to adjust theirs to account for external factors like market conditions. Make sure you have provisions in place that explain how variation can be mutually agreed, or what happens if a situation won’t result in mutual agreement from both parties.
  15. Avoid Issues Surrounding Intellectual Property. Today, it’s almost impossible not to create some form of intellectual property during a contract. Consumers usually want all the rights to something they have paid for. However, the provider should retain at least some rights. Make sure you know the difference between transferred and retained rights, and to set them appropriately. The final agreement needs to be practical for everyone. 
Check your Contracts for these 15 Things to Avoid Disputes
  1. If you spot deceitful practices during negotiation, make a sharp exit.
  2. Communicate well to solve issues mutually and avoid disputes.
  3. Focus on the outcome rather than the micromanagement of the other party.
  4. Lower human error and speed up the process using automation.
  5. Use clauses to cover recourse if a dispute arose.
  6. Never rely on just a handshake. Have all terms written down.
  7. Set clear quality expectations from the beginning for both parties.
  8. Set early termination rights to avoid possible long term problems.
  9. Keep written records, hanging onto them for at least six years.
  10. Remember to take legal advice before the contract is established or at the start of a dispute.
  11. If going through a dispute, consider alternatives than going through the usual legal proceedings.
  12. Set liability if the other party breaches the contract.
  13. Outline payment obligations and your procedure for dealing with disputes.
  14. Set provisions that enable changes in the contract.
  15. Ensure the other party knows what intellectual property they own and consider retaining at least some rights.