If you’re having trouble with a contractor or client, you can still find a solution that fits everyone. How you write your legal contracts can make this much more manageable. In this post, we’ll show you how to negotiate a contract dispute and minimize your losses.
When Contract Disputes Happen
Any issue that a contract doesn’t adequately cover can lead to long debates. For example, your client may not explain how change requests will work. Alternatively, your contractor might argue that the agreed deadlines aren’t practical.
Watch for warning signs of a potential dispute. If you address these early enough, you can avoid the problem altogether. Here are a few potential red flags:
- Communication slowing down
- Missing project milestones
- Delayed payments
- Complaints about quality
- Direct quotes from the contract
- Signs of a rushed job
- Major industry-wide market shifts
Even after completing a job, there’s still room for disputes. For example, your client may not pay you for the entire project. You’ll then have to start negotiating or even prepare for the problem to go to arbitration.
Tips for Negotiating a Contract Dispute
Your negotiation approach could seriously affect how you resolve the matter. Even when you’re entirely justified, the wrong attitude will end any hope of a win-win solution. With this in mind, here are seven tips for negotiating during a contract dispute:
- Follow the contract: Does the contract set out any formal dispute procedures? If so, it’s essential to follow these to the letter, assuming they fit the current situation.
- Get evidence: Collect evidence for your dispute. You might take photos of the project to show its poor quality. Alternatively, save emails promising to address scope changes.
- Meet the other side halfway: Listen to the other side and try to understand them. If they don’t feel like you’re paying enough for the work’s scope, hear them out.
- Consider compromising: It’s unlikely that you’ll get the other party to drop their dispute. Find a win/win solution that (at least partly) addresses every side’s concerns.
- Don’t rush: Many disputes are time-sensitive and could affect a project’s whole timeline. However, rushing through it can lead to you agreeing to the worst possible outcome.
- Get every concession in writing: Never leave anything to a verbal agreement, or the other party could rescind it. Always ask for everything you agree on in writing.
- Avoid ultimatums: You and your client/contractor probably have a fruitful partnership. If you enter a dispute, don’t risk it with ultimatums and arbitration unless necessary.
Should You Escalate a Dispute?
If the days (or even weeks) roll by without a resolution, you may consider escalating the matter. A third party might be necessary to facilitate a healthy discussion. This usually takes the form of mediation.
In mediation, the (neutral) mediator helps the client and contractor reach a mutually beneficial agreement. The process is usually quicker and cheaper than arbitration. However, it isn’t legally binding; you also might still not reach a verdict.
Arbitration, meanwhile, involves an arbitrator reaching a decision. The contractor and client both must follow their verdict. However, arbitration is more confrontational and can hurt your working relationship with the other party.
Only escalate disputes if there’s no alternative and negotiations aren’t working.
Using Your Contract to Avoid Future Disputes
Every dispute should start by looking closely at the contract. Even the disputing party may have simply missed a clause that answers their concern. Here are some ways to make your contracts airtight in the face of disputes:
- Use precise language: Don’t default to jargon, even if it’s easy for somebody to Google. A service contract must be easy for every party involved to understand.
- Add dispute resolution procedures: Any work contract needs a way of addressing the potential for disputes. You might set a two-week negotiation period before mediation.
- Set out the scope of work: The contract must set clear boundaries for the contractor’s duties. To avoid future issues, state what isn’t part of the project’s scope.
- Mention change requests: Many disputes happen when a contract doesn’t explain how contractors can bill for edits to their work. Both parties must agree on changes.
- Go over the contract: Make time to check over the contract with the other party. They’ll have a chance to ask questions and address any concerns they might have.
- Force majeure clause: Force majeure frees every side from liability when a significant event crops up unexpectedly. You won’t be responsible for potential delays or issues.
- Check online templates: Look at online templates and see what these contracts use to protect against disputes. These documents should be legally binding.
Final Thoughts
In any setting, a contract dispute could bring everything to a grinding halt. However, patient and open-minded negotiations can leave every party happy. With a well-written online contract, you can avoid these disputes in the first place.