How to Avoid Contract Disputes
A shorter, simpler contract doesn’t always mean a happier partyBy Andrew Brandt | Last updated on August 11, 2022
Typically, a written contract’s force majeure clause—which frees both signers from their obligations when an extraordinary event occurs—is viewed as a boilerplate provision and disregarded.
“But the clause has really come to the fore with COVID-19,” says Ted Banks, a business/corporate attorney at law firm Scharf Banks Marmor in Chicago. “People have been surprised by what the force majeure clause has been able to do or not do.”
Banks, who has studied cases involving the clause dating back to the 1918 Spanish flu, notes one recent case in which a restaurant tenant’s rent was lowered due to its reduced business. But that doesn’t always happen. “Some of the decisions I’ve seen have turned on whether the word ‘disease’ or ‘epidemic’ is contained in the text of the clause,” he says.
While a contract between two business parties always needs to contain certain provisions—like the aforementioned force majeure clause—relegating these stipulations to boilerplate status can lead to contractual disputes.
“There are definitely times when what are viewed as standard terms are not considered as fully as they could be, and often that’s where disputes come up,” says Matt Bills, a business litigator at Barack Ferrazzano Kirschbaum & Nagelberg in Chicago. “Sometimes those things are just recycled from agreement to agreement, or there’s not a lot of forethought put into those terms.”
Both lawyers agree that honest, direct communication between parties is also key to avoiding problems.
“As they start negotiations, they have to be clear on what it is they want,” says Banks. “Often, when there are problems, it turns out that the people had different ideas. Whether it’s a multi-page contract or just a short letter agreement, clarity and communication are the most important points. I’ve found that some people are afraid to be open lest they offend the other side, and that’s crazy thinking. You have to be open.”
And the language in the contract must reflect that verbal communication. Otherwise, ambiguities—and therefore disputes—may arise. “In general, the clearer the language, the tighter the language, the better,” says Bills. “What many practitioners try to do is have shorter, simpler contract provisions. The challenge, though, is that creative lawyering can find openings in the English language.”
Bills adds that a lawyer can help a business client anticipate problems, then add provisions to quell those worries into the terms of the contract. One such example is a provision for the dispute resolution process—meaning, if a disagreement arises, the contract clearly states how the conflict will be handled. For example, if the parties have agreed, in writing, on going to court to solve disputes, they will then need an additional venue provision specifying the court in which they will be resolved. Otherwise, if they’re not crystal clear, disputes over venue can often spin off into their own litigation.
“In Illinois, generally, if you use clear language like ‘exclusive venue,’ courts are likely to enforce that,” Bills says.
A final provision Bills recommends parties consider is a non-reliance provision, which states that the signing parties are going strictly by the contract. “What they were told in negotiations, other representations—they’re not relying on those things. Just the four corners of the contract,” he says. “Say someone comes later and says, ‘I know it’s not in the contract, but you told me X.’ When there’s a non-reliance provision, that may then defeat, early on in litigation, a claim of fraud.”
Adds Banks: “I’ve found that my business clients really appreciate it when I explain clauses that lawyers may be used to, but otherwise don’t really make sense to a businessperson. Having that additional explanation, it really helps businesspeople get comfortable with the agreement and understand what they are signing.”
To learn more about breach of contracts, avoiding contract disputes, contract negotiations, noncompetes, and contractual terms (terms of a contract),, please see our overview on contract law.
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