A contract is formed when both parties accept the terms and conditions. However, once a agreement is formed, contract disputes can arise that lead to commercial litigation. Most parties sign contracts with honest and good intentions. But contract disputes arise when one or both parties disagree about the terms and conditions of the agreement or when one party breaches the contract. The business agreementscan end up being the center of a business dispute and often lead to contract litigation. Our Chicago business litigation lawyers regularly handle contract disputes.
Contract disputes between businesses and/or individuals, are usually caused by a breach, a failure to perform by one or both parties, or a disagreement about the terms and conditions of a contract. Third parties can also be involved in contract disputes by way of interference or tortious interference. These disputes often involve large sums of money and the financial health and wellbeing of the parties.
There are many ways a party can breach a contract in Illinois. Some of the most common ways to breach a contract are failure to perform obligations under the terms of the contract, including but not limited to failure to pay pursuant to the terms of the contract, failure to perform services or tasks pursuant to the terms of the contract and failure to timely perform pursuant to the contract, among others. Other contract disputes involve failure to deliver goods, failure to pay for goods, failure to pay a promissory note or debt, failure to pay a personal guarantee, failure to comply with employment agreements and/or restrictive covenants (non-compete agreements and non-solicitation agreements), and failure to comply with a settlement agreement.
Business and contract disputes are often caused by a disagreement in interpreting the terms of the contract. Additionally, it is not uncommon for a party attempt to to take advantage of ambiguous terms or “ambiguities” in a contract or vague provisions of an agreement. Contract disputes can also be due to unilateral or mutual mistakes. Unfortunately, these disputes can lead to contract litigation and litigation involving other business disputes.
Elements of a Breach of Contract Case
There are four elements to a breach of contract dispute in Illinois: (1) a valid and enforceable contract; (2) performance under the contract by plaintiff; (3) breach of contract by the defendant; and (4) injury and damage to the plaintiff.
Contract Disputes Arising from Ambiguous Agreements
Contract terms can be vague, confusing and ambiguous. Ambiguous and unclear contractual terms and provisions can lead to serious misunderstandings and conflict and can result in disputes involving the terms of the contract. A contract will generally be construed in a light most favorable to the non-drafting party. So ambiguous terms or provisions will usually be construed against the drafting party. The courts have significant discretion when dealing with and ruling on ambiguous contracts, so it can be difficult to predict how the court will rule. When drafting and negotiating the terms of a contract, it is important that the terms are clear and unambiguous. This helps to avoid future contract disputes and contract litigation.
Contract Disputes Arising from Mutual Mistake
A mutual mistake occurs when the contracting parties did not understand each other when drafting and negotiating the contract. A contract can be rendered void due to mutual mistake. It is also possible that only certain provisions of the contract will be rendered void (this also applies to vague and ambiguous contract terms and provisions). For mutual mistake to apply, the mistake must have been at the time the agreement was executed. Questions to ask in determining mutual mistake: Does the mistake go against the basic assumption of the contract? Does the mistake materially affect performance under the contract? Did either party assume the risk of mistake when entering the agreement? Each of these questions should be considered when mutual mistake is a possibility.
An individual, professional or business can breach a contract in a number of ways, including failure to timely perform, failure to perform in accordance with contractual terms, or failure to perform at all. Our Chicago breach of contract attorneys handle a wide variety of contract disputes, which can be settled outside of the courtroom or litigated in front of the court.
Contract Disputes Arising from Oral Agreements
Oral or verbal contracts are enforceable in Illinois as long as the parties agree upon and accept the terms of the contract. As long as one or both parties perform (or partially perform) under the contract, the agreement will likely be enforceable.
Even though verbal contracts are just as enforceable as written contracts in Illinois, they are often more difficult to prove. Verbal agreements can be less clear than written contracts. But performance by one party can make an oral contract easier to prove. For example, if party 1 receives goods or services from party 2, party 2 should expect payment. It is best to put a contract in writing, but a valid breach of contract claim may exist without a written agreement.
Statute of Frauds (SOF) in the Contract Dispute Context
Although oral contracts are enforceable in Illinois, certain exceptions apply. The Statute of Frauds (SOF) governs which types of contracts must be in writing, rather than verbal. The categories of contracts governed by the Statute of Frauds are: (1) Contracts involving the sale of an interest in land;(2) contracts the performance of which extends beyond one year; (3) contracts in which someone assumes responsibility for someone else’s debt; that is, promises to be a surety; (4) promises the consideration for which is getting married; (5) contracts for the sale of goods worth more than $500; (6) Certain promises by executors and administrators. For more information about how the statute of frauds might apply to your oral contract, contact our Chicago breach of contract attorneys.
Common Defenses to Breach of Contract Claims
Some of the most common defenses in contract disputes are: laches, unconscionability, estoppel, statute of frauds, mutual mistake, duress, undue influence, fraud, no privity, statute of limitations and unclean hands, among others. Another common defense to a breach of contract claim is failure to perform.
A plaintiff in a contract dispute, or in any business litigation, must be mindful that time limitations (statute of limitations) apply to the filing of contract claims and other business litigation and commercial litigation claims. These limitations are different depending on whether the contract is oral or in writing. Time limitations can also differ depending on the type of business dispute. A defendant in a breach of contract dispute will also want to be mindful of the applicable statute of limitations to potentially use as a defense to the contract claim or other business litigation claims.
Remedies in Contract Disputes
The most common contractual remedies are: (1) money damages, (2) specific performance and (3) restitution; (4) rescission; and (5) reformation. Damages can be broken down into three categories: direct, incidental and consequential. Direct (compensatory) damages, or “benefit of the bargain” damages are what the non-breaching party would have received or been paid under a contract had the other party performed. Incidental damages are damages incurred in attempting to “mitigate” the effect of another party’s breach (e.g. transportation, care and custody of goods). Consequential damages are not directly caused by the breaching party, but that should be foreseen by the breaching party. Lost profits are one form of consequential damages.
A common question is whether or not punitive damages are available as damages for breach of contract in Illinois. Punitive damages are generally not available in Illinois for breach of contract. Only under certain limited circumstances, where the breach amounts to an independent tort, done with malice, wantonness or oppression, will punitive damages be available.
Attorney’s Fees Provisions in Contract Disputes
Illinois follows the “American Rule” with respect to attorney’s fees for breach of contract disputes. The American Rule provides that each party is responsible for his own attorney’s fees unless the contract specifically provides for attorney’s fees in the event of a breach or dispute. If the parties’ agreement does not provide for attorney’s fees, a party will generally not be entitled to attorney’s fees unless they are recoverable under an applicable statute.
Call Our Chicago Corporate Litigation Lawyers
Our Chicago corporate litigation lawyers have significant experience in handling a wide range of contract disputes and related business disputes in a wide array of business industries. Our litigation attorneys handle cases all over the Chicagoland area, including Cook, DuPage, Kane, Lake, McHenry, and Will counties. To schedule a consultation with one of our business litigation lawyers today, please contact us online or give us a call at 312-789-5676.