Dispute: Overview, definition, and example
What is a dispute?
A dispute is a disagreement or conflict between two or more parties, often arising from a contract, business transaction, or legal obligation. In a contractual context, disputes can occur when one party believes another has failed to fulfill their obligations, leading to potential legal action or negotiation to resolve the issue.
For example, if a supplier delivers defective products and the buyer refuses to pay, both parties may have a dispute over payment and contract performance.
Why is a dispute important?
Disputes are important because they can disrupt business operations, lead to financial losses, and damage relationships. Handling disputes effectively—through negotiation, mediation, or legal proceedings—can prevent costly litigation and protect business interests.
For businesses, having a clear dispute resolution clause in contracts can help define how conflicts will be managed, reducing uncertainty and potential legal expenses.
Understanding a dispute through an example
Imagine a small business hires a marketing agency to run an ad campaign. The contract states that the agency will deliver a certain number of ad impressions, but the business owner believes the results fall short. The marketing agency, however, argues that they met their contractual obligations. This disagreement over contract performance creates a dispute, which both parties must resolve—whether through direct negotiation, mediation, or, if necessary, legal action.
In another scenario, a software company licenses its product to a client under strict payment terms. If the client stops making payments, the software company may claim a breach of contract, while the client may argue that the product didn’t meet expectations. This dispute could lead to legal action unless both parties find a way to settle the issue.
An example of a dispute resolution clause
Here’s how a dispute resolution clause might appear in a contract:
“Any disputes arising out of or relating to this Agreement shall first be resolved through good faith negotiations. If the parties cannot resolve the dispute within [X] days, they agree to submit the matter to mediation before pursuing litigation.”
Conclusion
Disputes are an inevitable part of business, but how they are managed can make a significant difference. A well-defined dispute resolution process helps businesses save time and money while maintaining professional relationships.By including a clear dispute resolution clause in contracts, businesses can establish fair and efficient ways to handle disagreements, minimizing the risk of prolonged legal battles.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.