Resolving Business Litigation and Contract Disputes

Resolving contract disputes rarely requires a courtroom. They are resolved through negotiation, mediation, or arbitration, and even cases that are filed usually settle before trial. The right path depends less on the legal label attached to the dispute and more on what your business needs to protect.

Key takeaways

• Negotiation is usually the first step, and it can preserve both the contract and the relationship.
• Mediation and arbitration resolve disputes outside the courtroom, but they work very differently.
• Filing suit does not commit you to trial. Settlement can happen at any stage.
• Before choosing a strategy, identify what you are trying to protect: cash flow, a customer, a contract, a relationship, or the business itself.

Even when businesses work diligently to minimize the risk of ending up in court, litigation is sometimes unavoidable. Whether you are dealing with a breach of contract, intellectual property infringement, or a real estate dispute, you must be proactive. Working with experienced counsel helps you make informed decisions from the outset and develop a legal strategy that protects your company’s best interests.

What is the key to managing business litigation?

Business litigation can take many forms, including breach of contract cases, employment claims, intellectual property infringement, partnership disputes, business torts, and shareholder litigation. No matter the issue, legal disputes can be one of the most stressful parts of running a company.

Even in the best of circumstances, all commercial litigation involves a certain amount of risk and uncertainty. That is why the vast majority of civil cases resolve before a jury verdict. In effect, most cases settle because neither the plaintiff nor the defendant can be sure how a judge or jury will respond to the arguments made by each side.

When navigating a business dispute, the biggest key to success is having a plan. An experienced litigation attorney can help you identify the central factual and legal issues, weigh the advantages and disadvantages of available legal strategies, and determine which is most beneficial.

That plan should start with a question that has nothing to do with legal theory: what are you trying to protect? A dispute over an unpaid invoice is about keeping a key customer. A dispute with a co-owner is about control of the company or your own income. The answer shapes everything that follows, including whether to negotiate quietly, push for a fast resolution, or prepare for a fight.

What are your options for resolving contract disputes?

From delayed deliveries to quality concerns, contract disputes often drive business litigation. However, not every disagreement needs to result in a lawsuit. To avoid the stress, cost, and potential business damage of litigation, negotiation should generally be the first step when resolving contract disputes.

Negotiation is not easy, particularly when each party thinks the other is in the wrong. It requires open, honest communication between the parties, focusing on the facts of the dispute rather than emotions. Both sides must also be willing to work together in good faith. While negotiation requires compromises from both sides, it can often preserve the contract and your business relationship.

When informal negotiation is unsuccessful, businesses should consider alternative dispute resolution (ADR), which also allows contract parties the opportunity to resolve disputes outside the courtroom. ADR is almost always less costly and time-consuming than going to trial. This is particularly true for complex cases involving complicated issues or multiple parties.

How do mediation and arbitration differ?

The most common forms of ADR are mediation and arbitration. Mediation uses a neutral third party to help parties negotiate disputes and reach settlements. The mediator’s role is to facilitate agreement, not to issue binding decisions. Mediation may not fully resolve the case, but it often narrows the remaining disputes that require court resolution.

In arbitration, a neutral individual or panel resolves the dispute. In some cases, the arbitrators are subject matter experts and may be more knowledgeable about complex areas of law, such as intellectual property, insurance, or securities law. While arbitration still involves hearings and document submissions, it generally moves faster than court proceedings. Unlike mediation, the arbitrator’s decision is final and binding, so the parties must be willing to accept the outcome.

When should a business settle a dispute?

Choosing litigation does not guarantee a trial; many cases get resolved before reaching that stage. Settlement negotiations can happen at any point in the litigation process and may even be mandated by the court. For a deeper look at this decision, see When to Settle and When to Fight: A Litigator’s Framework.

In determining whether settling is in your best interests, there are several factors to consider:

• Resources. Settlement speeds up resolution, saving time and money for all parties involved. A company with the resources to see a case through may be more inclined to invest in building and pursuing its claims, but it should weigh that investment against the disruption to the business.
• Control over terms. Settlement empowers the parties to shape the agreement, including installment payments or asset exchanges. Courts, by contrast, are generally constrained by statutes and legal precedent.
• Confidentiality. Settlements often include confidentiality provisions, helping litigants avoid public scrutiny. Court documents are generally public records.

The right answer also depends on what is at stake beyond the dollar amount. If the dispute threatens a relationship you want to keep, a customer you cannot afford to lose, or your role in the business, those interests may justify a faster or more creative resolution than the legal merits alone suggest.

Frequently asked questions

Does resolving contract disputes require a lawsuit?

No. Many disputes are resolved through negotiation, mediation, or arbitration without filing a lawsuit. Litigation is one tool, not the only one.

Is arbitration better than going to court?

It depends on the dispute. Arbitration is usually faster and more private, and the decision is final. But that finality also limits your ability to appeal, and the process may be required by a clause in your contract whether you prefer it or not.

Can I settle after a lawsuit has been filed?

Yes. Settlement can occur at any stage, including on the eve of trial. Courts frequently encourage or require settlement discussions.

What should I do first if a contract dispute develops?

Preserve the contract, communications, and financial records; note any deadlines to respond; identify what the dispute could cost your business beyond legal fees; and consult counsel before sending demands or taking steps that could escalate the dispute.

How Scarinci Hollenbeck can help

The members of Scarinci Hollenbeck’s Commercial Litigation Group are experienced in resolving contract disputes for businesses of all sizes. Working side by side with clients, the firm’s business litigators devise strategies that both protect their legal rights and advance their business goals, prioritizing cost-effective approaches through negotiation, alternative dispute resolution, and, when required, efficient litigation.

Michael B. Mietlicki, Counsel in the firm’s Litigation practice, represents businesses and their owners in complex commercial litigation, contract disputes, business torts, and ownership and control disputes. His approach begins with understanding the client, the business interests driving the dispute, and what the client is ultimately trying to protect. If you are facing a breach of contract claim or other business dispute, contact Mr. Mietlicki or another member of the Commercial Litigation Group to discuss your options.