How to resolve a lease dispute

Breach Of Commercial Contract Explained — What Business Owners Should Know

From construction operations to large-scale manufacturing corporations, commercial contracts are the backbone of business relationships, ensuring that agreements between parties are clear and enforceable. These commercial contracts cover various aspects, from the supply of goods and services to complex distribution and manufacturing agreements. 

In this blog, we’ll outline the common reasons for disputes in commercial agreements and explain common remedies for a breach of contract so that you can navigate these issues with confidence. 

Five common reasons for commercial contract disputes 

While no business wants to find itself in these situations, contract breaches appear all too often. In most cases, these disputes can be resolved quickly and amicably, benefiting both parties. Let’s examine the common instances of commercial contract disputes: 

  • Non-performance or delayed performance 

One of the most common reasons for commercial agreement disputes is the failure to perform obligations on time or at all. This could be due to delayed deliveries, incomplete services or consistent failure to meet agreed standards. 

For instance, in a supply agreement, if the supplier fails to deliver goods within the agreed time frame, it can disrupt the buyer’s operations, leading to a breach of contract. Non-performance can also occur in service agreements when a provider does not deliver the promised services, causing operational setbacks and disrupting cash flow. 

  • Defective goods and services

Another frequent issue is the supply of defective or substandard goods or services. In manufacturing agreements, for example, if the products delivered do not meet the specified quality, it can lead to significant financial losses and breach of contract claims. This can be particularly detrimental in industries where quality control is critical, such as pharmaceuticals or high-tech manufacturing. Defective services can also cause considerable harm to the business, especially if they lead to a chain of operational failures.

  • Disagreement or misunderstanding in terms 

Sometimes, parties may interpret previously agreed-upon contract terms differently, leading to disputes. This is particularly common in complex agreements like distribution agreements, where the terms might be subject to varying interpretations. Ambiguities in contract language can lead to misunderstandings, with each party believing they are entitled to different rights and obligations. These disagreements can escalate quickly if not addressed promptly and clearly by legal professionals.

  • Financial issues 

Financial difficulties, such as insolvency or cash flow problems, can prevent a party from fulfilling their contractual obligations, resulting in breaches. In service agreements, a company facing financial strain might be unable to pay for services rendered, leading to disputes. Financial instability can also cause a cascading effect, where one breached contract causes further financial troubles, leading to more breaches and disputes.

  • Sudden changes in circumstances

Unforeseen circumstances such as natural disasters, changes in law or market conditions can affect the ability of parties to perform their contractual obligations. For example, a sudden change in import regulations might impact a supply agreement, leading to a breach.

Similarly, natural disasters can disrupt supply chains, and changes in economic conditions can alter the feasibility of contract terms. These factors, often beyond the control of the contracting parties, can significantly impact a party’s ability to fulfil their obligations. 

Process for resolving breaches of commercial contracts

Should you find yourself in the middle of a contract dispute, understanding the next steps is essential for a successful outcome. Here are some formal and informal remedies you may undertake for your case:

  • Negotiation and mediation — Typically, the first step in resolving a breach of contract is a negotiation between the parties involved. Having a legal professional oversee this process is highly recommended, as it can help clarify misunderstandings and reach a mutually acceptable solution without escalation. Mediation, involving a neutral third party, can also be an effective way to resolve disputes amicably and can save time and costs associated with formal legal proceedings, keeping the case outside the courts. 
  • Review and amendment of contract terms — If the breach is due to unclear or disputed terms, reviewing and amending the contract can help prevent future disputes. This process involves revisiting the contract terms, clarifying any ambiguities and ensuring that both parties agree on the revisions. Regular commercial contract reviews can also help ensure the revised terms remain relevant and practical for both parties.
  • Arbitration — In some cases, commercial contracts may include an arbitration agreement, requiring disputes to be resolved through arbitration rather than court litigation to preserve confidentiality for the involved parties. Arbitration is generally faster and more cost-effective than court proceedings and involves an arbitrator who makes a binding decision on the dispute.
  • Settlement agreements — Parties can also choose to settle the dispute out of court by entering into a settlement agreement. This agreement outlines the settlement terms, including any compensation to be paid and any actions to rectify the breach. 
  • Formal legal action — When all non-escalating remedies fail, formal legal action may be necessary. As it can be costly and time-consuming, formal legal proceedings are generally viewed as a “last resort”. This involves setting up a case for the breach of contract, where the aggrieved party seeks compensation for damages caused by the breach. The court will examine the contract terms, the nature of the breach and the evidence presented before making a ruling. 

Don’t do it alone — choose ADVIILAW to manage your commercial dispute case

Whether negotiating settlements, amending commercial, business or property contracts or confidently representing you in court, look no further than the capable team at ADVIILAW. We are a trusted partner for many businesses in managing and resolving commercial contract disputes, ensuring operations continue to run smoothly and efficiently. To discuss your commercial contract dispute, please contact us today.


Disclaimer

This commentary is of a general nature only, containing some general information for the reader.

It is not intended to be legal advice, nor can it be relied upon as legal advice, as each case will depend upon its own specific facts, matters and circumstances.

To this end, please kindly read our Website Terms including the disclaimer contained therein carefully. Laws, rules and principles may be subject to sudden and unexpected changes and you should always consult a lawyer about your specific circumstances before committing to a course of action.

Your Trusted Lawyers

For a lawyer in Brisbane that you can trust to represent your best interest, contact the team at ADVIILAW. We are proud to be a team of specialist senior lawyers with years of experience in commercial, property and litigation in Australia. Rely on our team for the best advice and legal represntation in Brisbane

Contact Our Team

Book Appointment

DISCUSS YOUR MATTER WITH OUR LAWYERS TODAY

CONTACT OUR TEAM Book Appointment
AdviiLaw
5.0
Based on 100 reviews
powered by Google
Celia McQueen
Celia McQueen
10:38 17 May 21
Alice helped us with the purchase of our first home, and we greatly appreciated her attention to detail and clear... communication throughout the process. We would gladly work with her again or recommend her to others. Thanks Alice!read more
Natalie Dugec
Natalie Dugec
10:55 12 Apr 21
I am extremely grateful for the help I received from ADVIILAW. I required their services for a defamation case and... their services exceeded my expectations. At any time I needed them they were always available to help promptly and did so with a high level of professionalism. Zoran Gelic is great to work with. He explained every step in detail so that I could clearly comprehend and make informed decisions to support my case. This assisted with the positive outcome. If you need a lawyer. I highly recommend ADVIILAWread more
Michael Zarafa
Michael Zarafa
21:56 01 Apr 21
I highly recommend Zoran Gelic as a defamation lawyer. He has a proactive approach and explains everything in detail. I... ended up with a positive outcome and the experience I had with him was fantastic. Keep up the great work Zoran.read more
Rodney McEwan
Rodney McEwan
08:26 31 Mar 21
I can highly recommend Zoran Gelic from Adviilaw who attended to a defamation matter on our behalf. Zoran was extremely... knowledgeable, helpful and professional in resolving this matter. I can highly recommend Zoran Gelic to anyone in need of a lawyer, specifically in relation to defamation law matters.read more
Rin Kim
Rin Kim
06:41 01 Mar 21
Excellent services. I highly recommend AdviiLaw for any commercial legal help.
Carly McClintock
Carly McClintock
10:24 21 Dec 20
Alice was very professional, efficient and knowledgeable with her work, while helping us understand the process in... buying our first home. I highly recommend AdviiLaw for all your conveyancing needs.read more
Bill Vo
Bill Vo
22:03 01 Dec 20
Thank you Alice for your dedication and attention to detail towards our first home loan! Alice came highly recommended... by our broker and from day 1 Alice was very professional and courteous.Alice literally went above and beyond throughout the entire process to ensure the outcome would be in our best interest.I highly recommend to contact AdviiLaw, not just for conveyancing but for other solicitor services too!Thank you again Alice!read more
More reviews
js_loader