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Cost of Doing Business? How Costly?

Close up of contract, concept of contract disputes

While contract disputes are often considered, by business owners, to be part of “the cost of doing business,” understanding them and having the right team of experienced business contract attorneys can make resolving, or even preventing, disputes, much less painful. At Rosenbaum & Taylor, P.C., we have the knowledge and experience to guide companies through contract disputes, whether they are claiming that there was a breach, or another party is claiming a breach. Keep in mind that when a business is sued for breach of contract, that claim is generally not covered by its general liability insurance, so the business will be responsible for retaining its own lawyer.

Breach of contract claims, disputes and lawsuits are common in business, but depending on the nature of the contract issue, they can often be very distressing. Having handled business disputes for decades, we know the financial, business, reputation and sometimes, even emotional impact, business disputes can have. Business contract disputes can undermine the stability of a business by threatening critical business relationships, impacting finances and disrupting the business’s operations.

It is essential to work with an experienced business attorney who can handle the dispute correctly, whether that means negotiating a resolution, bringing a lawsuit, defending a lawsuit, or drafting, or re-drafting the contract. Sometimes resolving a contract dispute involves a combination of approaches and it is important to understand all of the implications of the issues involved and all of the possible options for resolving the dispute.

Of course, it is best to attempt to prevent breach of contract disputes by working with experienced contract drafting attorneys and using carefully drafted contracts, which we address in another article.

Business contract disputes arise in the context of a variety of different contexts. The business contract disputes we see most often are in the following areas:

Contracts Between Companies

Businesses may contract with other businesses, vendors, customers, consumers, clients, consultants, service providers, and any number of other people or entities with which the business interacts on a daily basis. Depending on the context, our clients may be the seller or buyer, service provider, consultant, vendor or client, owner, construction manager, general contractor, or subcontractor. Our clients have sought to enforce contracts, sought to resist enforcement of contracts, sought collect or to limit damages, sought to re-negotiate contracts, or sought advice on strategic considerations for addressing a business contract dispute.

Claims that a Contract Has Been Materially Breached

When we speak with a client, or prospective client, about a breach of contract issue, we first have to analyze whether the alleged breach at issue so significantly impacts the purpose of the contract as to be considered to be material by New York courts. Breaches that are not material may not entitle the non-breaching party to damages.

Commercial Leases

Commercial leases are often long and may address situations that seem, at least at the time the lease is signed, to be unlikely to arise. Some parties to commercial leases do not negotiate terms that become significant later in the life of the lease. In our experience, lease-related disputes also sometimes arise because commercial lessors and commercial lessees do not always read the language in their commercial lease contracts. Parties to commercial leases are not always fully aware of their rights and obligations, which can lead to confusion and unintentional breaches. In other situations, one party to a commercial lease may be attempting to take advantage of the other.

Contracts for the Sale of Goods

Often in contracts for the sale of goods, one company, or business, buys component parts, or goods, from another business. The transaction is often carried out simply, with only a simple purchase order. If no issues arise, then the potential complexities can be easily overlooked or forgotten. If issues do arise, for example, the component provided does not meet the required specifications or is not suited for the purpose the buyer needs, the lack of writing covering key terms can be very costly, under the Uniform Commercial Code, which may apply to the sale of the goods.

Tortious Interference With Contract

Strictly speaking, tortious interference is not a contract dispute, but it does fall under contract law. A tortious interference claim arises when two parties have entered into a contract and an outside party attempts to damage that contractual relationship by interfering with one, or more, of the aspects of the contract. Under those circumstances, either party to the contract may have a viable cause of action against the outside party that interfered with the contractual relationship.

Non-Compete Agreements

Some businesses, or companies, may seek to have their employees sign non-compete agreements which may limit the employees’ ability to work in the same field after leaving the company. Under New York law, these types of agreements are subject to scrutiny and must be written in specific ways, to increase the likelihood that they will be found to be enforceable.

Non-Disclosure Agreements

There are a number of circumstances under which one business, or company, may seek to have another business, or company, sign a Non-Disclosure Agreement, or NDA. If companies are looking to merge, or if one company is looking to buy another, the parties may enter into a Non-Disclosure Agreement to protect sensitive information, including things like financial information, trade secrets, new technologies, and customer lists. Employees in certain industries are also often asked to sign Non-Disclosure Agreements. Litigation is often threatened, or commenced, when there is an indication, or evidence, that a Non-Disclosure Agreement has been breached.

Statute of Limitations for Breach of Contract Claims

Under New York law, the statute of limitations for filing a breach of contract claim is six years from the date of the breach, not from the date the breach was discovered. Our advice, to our clients, is to contact us as soon as they become aware of a breach, or a potential breach, whether they have committed it, or the other party has. Either way, it is best to act early, to develop the proper strategy and to minimize the impact to the business and if possible and desirable, to the contractual relationship.

Remedies and Damages

We address the basic remedies available in breach of contract actions in another article.

In a breach of contract action, the damages awarded in court are intended to return the party damaged by the breach to the position it would have been in had the breach not occurred, and had the contractual obligations been fulfilled.

The experienced business attorneys at Rosenbaum & Taylor, P.C. are an asset to any company, or individual, facing, or dealing with a breach of contract action, or claim. We have the perspective and skill to work with you to minimize the impact to your business, so you can keep your focus on the company, and not on legal issues.

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