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What Contract Clauses Can Often Lead to Disputes?

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Well-drafted and robust commercial contracts are vital for safeguarding your business from risks and avoiding disputes. However, specific contractual terms can present significant risks and lead to disputes. As a supplier to business customers, ensuring your contracts avoid such risks is vital. This article will explore the types of contract clauses that can often lead to disputes. 

Which Types of Clauses Can Result in Contract Disputes?

Written contracts must be well-drafted, clear, and robust. Various risks could arise if contract terms are unclear, incomplete, or unfair. For instance, arguments between a supplier and customer could be around mismatched expectations and the interpretation of specific clauses. 

Investing in well-drafted contracts from the outset is vital to avoid the risk of disputes arising. 

There is a range of contract clauses that could result in disputes.

In particular, the following types of clauses:

Unclear Clauses

Lack of clarity in contracts can result in disputes. Unclear terms are likely to create confusion and mismatched expectations, which leave room for misinterpretation of contractual provisions. For instance, this could include vague contract terms around payment terms and a supplier’s obligations. Ambiguity is, however, a key risk issue and could cause various problems. 

Missing Clauses 

If critical terms are missing from your contract, disputes could arise. For instance, if your contract does not fully define your obligations as a supplier, a customer could raise a dispute around the scope of work for their project—for instance, if they believe you have failed to deliver what you agreed to. 

Unfair Clauses 

Too onerous terms could be deemed unfair, giving rise to disputes and challenges around whether they are legally binding. This could be if a supplier’s standard terms around liability are overly harsh and leave the customer without any meaningful remedy.

What Are Practical Examples of How Disputes Could Arise?

Let us explore a few practical scenarios around how a dispute could arise in this context:

A Payment Dispute

Your business has supplied services to a customer and verbally agreed that the customer could pay for instalments upon completion of each deliverable. However, your contract terms did not clearly define when each payment was due or any non-payment penalties. When the customer fails to pay on time, you suspend the services and charge interest. After repeatedly chasing your customer, the customer fails to pay outstanding amounts, and your business is forced to bring a debt claim against their business, resulting in significant time and costs. 

A Termination Dispute 

A customer who had committed to a long-term, profitable project with you seeks to terminate the contract. Your contract is vague and does not correctly specify an initial term in which the customer cannot terminate, leading to a dispute over the customer’s termination rights. Due to the lack of clarity over termination rights, the customer argues they are entitled to terminate. 

An Intellectual Property Dispute 

Unclear intellectual property terms could result in disputes. For instance, if you create content for a customer, the contract about whether the customer owns your created content is ambiguous. This can be particularly important for high-value projects involving creating business-critical intellectual property rights, such as a website created under a website development contract. 

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These are all practical examples of a handful of disputes which could arise between contracting parties under a contract. However, numerous disputes could arise from poorly drafted contract terms, so it is vital to prioritise robust contract drafting. 

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Your business should never underestimate the consequences of a poorly drafted contract. Poorly drafted terms can escalate into costly contractual disputes, costing you far more than the cost of preparing a well-drafted contract from the outset. 

A clear and watertight contract is essential to avoid such issues and potential disputes. Your business can achieve this by prioritising attention to detail, explicit language and correctly defined legal terms. This means that each party’s obligations are clear, and there is little room for misunderstandings that could escalate into disputes.

If you require support drafting a contract that avoids disputes, you can work with an experienced commercial lawyer. A commercial lawyer can add value in various ways, including by:

  • drafting clear contract terms that your customers can understand to make business relationships and contract negotiations smoother and more efficient; 
  • adopting a balanced approach for both parties to avoid customers complaining or querying unfair terms; 
  • drafting enforceable terms that will not be subject to arguments, potential disputes, and litigation around enforceability; and 
  • helping you quickly resolve customer contract queries and problems efficiently, including negotiating contracts on your behalf. 

Key Takeaways

Unclear or onerous terms in your contracts can lead to several negative implications. In the worst case, they can lead to mismatched customer expectations, escalating into costly and time-consuming disputes. Some key examples of clauses which can lead to disputes include termination and payment clauses. As such, it is vital to carefully consider and work on your commercial contracts to avoid the risk of conflicts arising. You can work with an experienced commercial lawyer to draft watertight and robust agreements on your behalf. Working with a lawyer can help ensure your contract is legally sound and transparent to avoid the risk of challenges and disputes arising from the outset. 

If you need help with a contract, contact LegalVision’s experienced contract lawyers as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page

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Sej Lamba

Sej Lamba

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