For over 125 years, McCabe and Mack LLP has provided legal expertise to clients throughout the Hudson Valley and beyond. Among many areas of practice, commercial litigation has been a big part of the firm’s history. Businesses of all sizes sometimes find themselves in situations that require legal action, and contract disputes are often what prompt a client to reach out for help.
Thomas J. Cummings, Associate at McCabe and Mack LLP, represents businesses and individuals in litigation pertaining to a wide range of contract disputes and commercial collection matters, including in disputes involving employment agreements, professional services agreements, shareholder agreements, commercial lending, real estate agreements, secured transactions, promissory notes, and personal guarantees.
We asked him to provide answers to the most frequently asked questions about contract disputes; below is a Q&A that we hope will prove helpful:
Q. Please explain what a contract dispute is.
A. It’s simply a disagreement between parties to an agreement as to what one or the other is entitled to under its terms.
Q. What are the common reasons that parties will end up in a dispute?
A. Contract disputes often occur when the contract language is not clear as to what the parties’ respective rights and obligations are or doesn’t address a particular issue at all. Disputes are also more likely to occur when one party has performed all of its obligations under the agreement and the other party, which has significant obligations left to perform, refuses or is unable to live up to its end of the bargain.
Q. Can you provide some examples of the types of contract disputes you most often see?
A. Construction disputes are common. Oftentimes the property owner has paid a contractor in advance and the contractor either walks away without finishing the job or refuses to return funds for defective work. It is also common to see disputes between contractors and subcontractors for non-payment.
Real estate disputes between landlords/tenants and mortgagors/mortgagees are also quite typical. Pandemic-related legislation made things difficult for landlords and lenders over the past couple of years, but things are starting to normalize now that many of the restrictions have expired.
Q. How do you define a “breach of contract”? And what happens if I breach a contract?
A. A breach occurs whenever one party fails to comply with one of the agreement’s terms. If the breach is minor, the non-breaching party might ask you to correct the breach or otherwise make up for it, but it is unlikely to result in any litigation. If the breach is “material,” (meaning significant) the non-breaching party is entitled to terminate the agreement and may sue you for damages it incurred to put itself in the position it was supposed to be in.
Q. If two parties agreed to something with a “handshake deal”, how is that handled when a dispute arises? Is there any recourse or does everything need to be in writing?
A. The “Statute of Frauds” requires certain agreements to be in writing, but the doctrine doesn’t come up that frequently. Even where a writing is required, there are exceptions to the rule, such as the parties’ performance under the oral agreement, that allow the aggrieved party to bring a claim in some form or another. In the absence of a contract or other documentary evidence, however, it can become more difficult to prove the existence of a contract or what its terms were.
The best practice is always to have an agreement in writing.
Q. Can you explain express and implied agreement terms, and how those are viewed in a dispute?
A. Express terms are those that appear in the text of the contract. Implied terms are those that don’t appear in the text, but are nevertheless binding on the parties. Some terms are implied in every contract, like the covenant of good faith and fair dealing. Others may be imposed when the parties’ agreement is silent on an issue either by statute (usually a default rule) or by a court in light of the parties’ conduct or relevant industry standards.
Q. In a dispute situation, am I entitled to legal fees from the other party?
A. The default rule is that the parties pay their own legal fees. Generally, a party can only recover legal fees if there is a term in the contract to that effect or a statute that entitles a prevailing party to fees under the circumstances.
Q. How do I remedy the dispute situation?
A. It depends on the circumstances and what your goals are, but it generally starts with the parties attempting to resolve the issue on their own. If you cannot reach a compromise, you have to decide whether it is financially worth it to pursue legal recourse or to cut your losses and walk away.
Q. What can I do to protect myself from a dispute in the first place?
A. I think it starts with choosing, if you can, to do business with a party that you trust. If the parties have a good relationship, they’re more likely to resolve a dispute without attorney intervention.
A well-structured contract is also important. The more concerned you are that the other party might not perform, the more important it is that your contract explicitly address likely contingencies and your remedies in the event they occur.
Thomas J. Cummings, Associate at McCabe and Mack LLP, is a native of Fishkill, NY; he graduated from John Jay High School before earning a B.A. from University at Albany – State University of New York (Magna Cum Laude, 2011) and J.D. from St. John’s University School of Law (2015). Thomas can be reached by calling 845-486-6887 or by emailing: tcummings@mccm.com.