Disputed claims: Overview, definition, and example
What are disputed claims?
Disputed claims refer to claims made by one party that are contested or challenged by another party. In a legal or contractual context, a claim is a demand for something, such as money or action, that is rejected or disputed by the other party. These disputes often arise from disagreements over terms, amounts owed, or the fulfillment of contractual obligations. Disputed claims can occur in various industries, such as construction, insurance, and business transactions.
For example, a contractor might submit an invoice for work done, but the client disputes the amount, claiming the work was incomplete or substandard.
Why are disputed claims important?
Disputed claims are important because they can delay or complicate the resolution of obligations under a contract or agreement. If not addressed properly, these disputes can lead to legal actions, damage business relationships, and increase costs. Understanding how to handle disputed claims is critical for businesses to avoid unnecessary litigation, negotiate settlements, and protect their rights. Clear dispute resolution processes in contracts can help resolve these claims efficiently and fairly.
For businesses, having a clear procedure for resolving disputed claims can help minimize risks, prevent prolonged disputes, and ensure a fair resolution process.
Understanding disputed claims through an example
Imagine a supplier delivers goods to a retail store but the store disputes the claim, saying the goods were damaged during shipping. The supplier insists the goods were properly packed and delivered in good condition. The store’s claim for compensation is therefore disputed. In this case, both parties would need to resolve the issue, either through negotiation, mediation, or legal action, depending on the terms of their agreement.
In another scenario, a contractor submits a claim for payment after completing a construction project. The client disputes the claim, arguing that certain aspects of the work were not completed as per the contract. The dispute may need to be resolved through an internal review or third-party arbitration.
An example of a disputed claims clause
Here’s how a clause like this might appear in a contract:
“If any claim is disputed by either Party, the disputing Party shall provide written notice within [X] days, outlining the grounds for the dispute. The Parties agree to attempt to resolve the dispute through negotiation or alternative dispute resolution methods before seeking legal remedies.”
Conclusion
Disputed claims can create challenges in business relationships and contracts, but they are a common part of many industries. Understanding how to address and resolve disputed claims is essential to prevent escalation, preserve business relationships, and avoid costly litigation. By including clear dispute resolution processes in contracts, businesses can better manage these claims and reach fair resolutions.
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.