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Considerations before contract disputes

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Some people or businesses may confront the issue of when to pursue claims for breach of contract.

The legal elements for a breach of contact claim are relatively simple to state. They are that a valid contract exists, it was breached by non-performance, causing injury to a party to the contract.

Breach of contract can arise in many different scenarios. It can arise, for instance, when a building contractor and homeowner dispute if construction occurred per the contract, when a seller and buyer of goods argue over the quality of the goods delivered, or when a tenant fails to pay rent.

Regardless of the type of contract dispute, there are often some fundamental questions a party may want to assess, before electing to escalate the dispute to litigation or another form of dispute resolution. Some of these questions are outlined below.

1.What is at stake?

Arguably, the first question one should ask is whether the costs associated with raising, and potentially litigating, a dispute are worth the potential benefit. One can often weigh the costs and benefits in terms of money. How much money will it cost to escalate the dispute? How much money will I likely get if I do so?

Besides money, there can be other costs and benefits to consider. The costs can include the time, frustration, hassles and potentially negative publicity associated with escalating a dispute, especially if escalated to litigation. The benefits can include positive publicity, message sending, and the satisfaction of being proven right.

2.If I win, will I collect on the money judgment?

Securing a money judgment against the opposing party can be the first step of a two-step process. After the court enters the money judgment setting the amount due, the second step can be collecting on that judgment. Debt collection can be difficult, time-consuming, and expensive. It can also be a necessity, if one hopes to collect on a money judgment.

While judgment collection is not always the sole objective to litigation, it typically is a key component. Collectability is important, otherwise a judgment creditor risks spending good money in pursuant of collecting on a bad debt.

3.Will I get sued?

It is not uncommon for a lawsuit defendant to assert the defendant’s own claims against the plaintiff, after the plaintiff has commenced litigation. When deciding whether to sue, one should assess the likelihood that the other party to the contract dispute may escalate the matter with a counterclaim.

Even when the risk of a counterclaim exists, there can be strategic reasons to file suit first. In addition to the potential psychological impact of being the first to file, the possibility of multiple court venues or jurisdictions can cause a party to file suit first. The first to file may be able to control where the litigation occurs, and can secure home court rather than to be forced into litigation in a different county, state, or country.

4.How old is the dispute?

If there is a valid dispute that may be worth pursuing, time can be a factor.

In addition to the risk of losing evidence due to a delay in filing, the statute of limitations for breach of contract claims is typically three or six years, depending on whether the contract is in writing.

The limitations period is typically three years for non-written agreements. It is most often six years for written agreements. If the dispute is too old, it may not be worth pursing, due to the statute of limitations bar or because of the loss of evidence.

5.Attorneys’ fees

Whether a contract contains a legal fees clause if often a key consideration when deciding whether to pursue litigation or another form of dispute resolution.

Litigation can be expensive. While contingency fees, flat fees, or insurance coverage may be possibilities, parties to contract disputes typically pay their attorney by the hour.

While there is seldom a guarantee of repayment of legal fees from the opposing side, many contracts contain legal fee clauses, where the parties have agreed at the time of contracting that, in the event of a dispute, the substantially prevailing party will also be entitled to payment of their legal fees and costs.

6.Are you committed?

Litigation takes time and can last longer and cost more than expected. In addition to opposing parties trying to wear you down and drag out a case, the realities of competing court, lawyer, and party schedules also can slow the process. Be prepared for a long engagement if litigation commences. If you are not, this realization could factor into the decision whether to pursue the contract dispute, or how you desire to resolve the dispute.

While much can go into the decision of whether to pursue a breach of contract claim or other course of action, one should consider both the pros and cons of pursuing a claim before commencing litigation or otherwise escalating a dispute. A thoughtful attorney can help. You should look for an attorney who will discuss with you both the merits of your case, as well as the risks and potential costs of pursuing a claim. From there, hopefully, you can make a well-informed decision.

Brian A. Walker represents businesses and individuals in commercial, business, employment, real estate and other disputes from the Wenatchee office of Ogden Murphy Wallace PLLC.