Sooner or later, a business dispute may arise whether it is external (customer, contractor or vendor) or internal (employee, partner, or investor). Written contracts are good business even if the contracts are small. Taking the time to get the agreement in writing substantially increases your ability to resolve the dispute favorably. Sometimes litigation or arbitration cannot be avoided. However, a well written contract that governs the dispute will increase your ability to predict the outcome and thus manage the risks associated with costly litigation.
A written contract is good step. A clear and concise written contract is better. A poorly written contract can be as bad as or worse than no contract. In Arizona, certain contracts are required to be in writing to be enforceable. Some examples are a contract for the sale of goods with a value of $500.00 or more (subject to certain exceptions); contracts involving the sale of real property or an interest therein; or a contact to answer for the debt of another, more commonly known as a guaranty.
The contract terms will depend on the type of contract. However, certain provisions apply almost universally in business. Termination provisions should be clear and concise such as, when and under what conditions termination occurs. Liquidated damage provisions provide a pre-determination of the amount of damages in the event of breach. These must meet certain requirements because courts typically will not enforce penalty clauses disguised as liquidated damages. Choice of law and forum selection clauses are important to insure that a dispute is litigated in your home state or county. These are especially important if conducting interstate business. Alternative dispute resolutions, such as arbitration or mediation are helpful. Those provisions must adequately define the ground rules for the arbitration. Indemnification provisions can mitigate or eliminate liability exposure. Warranty limitations or exclusions must contain specific requirements to be enforceable. In Arizona, the prevailing party in a dispute arising out of a contract may be awarded their attorney’s fees and costs from the losing party. However, if your contract does not contain an attorney fee provision, the court’s award of attorney fees is discretionary, not mandatory.
If you are not currently using written contracts, you should. If you already are using written contracts you may want to have your contract reviewed by an attorney. Well-written contracts are invaluable tools in managing disputes.
If you have any questions concerning contracts or any other legal disputes please call Rowley Chapman Barney & Buntrock at (480) 833-1113 and ask for Shane Buntrock
