Contracts provide security and predictability in everyday life and business operations, defining mutual obligations and responsibilities. Regular business operations would have been unthinkable without them. In commerce, contracts deal with relationships between clients, vendors, and employees.
A contract must comprise fundamental elements such as an offer, consideration, acceptance, intent, capacity, and legality. First, one party proposes entering into a contractual relationship. The reason why parties sign a contract is called “consideration.” The next step is acceptance of an offer. It must be intentional and mutual. In other words, there should be a meeting of the minds between the parties (who must have a legal capacity to commit to the contractual terms). Finally, the terms of the contract must not violate the law.
Acting opposite to the terms constitutes a breach of contract, which occurs when one party fails to uphold its obligations.
For example, if your supplier failed to deliver goods on time, or the quality of products does not fit the purpose known to them before entering into the contract, you are dealing with a breach of contract. Failing to pay on time is also a breach.
There are three main types of breaches: non-material, actual, and material breach of contract.
A minor breach that does not compromise the integrity of contractual relationships is called a non-material (partial) breach.
An actual breach of contract (a fundamental breach) is a substantial deviation from the agreement. In addition to seeking actual damages, the complying party has the right to sue their opponent and compel them to perform their obligations.
When non-compliance with the terms is irreparable (a material breach), the complying party is entitled to collect the damages. It affects the existence of the contract.
The traditional way of dealing with breaches of contract is by filing a lawsuit in court.
To prove a breach of contract claims, the plaintiff must show that the contract is a valid and binding agreement. A complying party must also demonstrate that the other party failed to fulfill its obligations, causing monetary damages to the plaintiff.
However, court litigation is a time-consuming and financially-draining process. Getting an initial court date can take months. Strict litigation rules and multiple stages (discovery, opening statements, witness examination, and closing arguments) result in considerable fees and court expenses. In commercial relationships, the costly and time-consuming court process is ineffective for resolving breach of contract disputes.
The dynamics of business relationships require resolving contract disputes quickly and effectively, without undue publicity. An alternative dispute resolution method, mediation is perfect for dealing with sensitive breach of contract issues.
The mediation process consists of four stages: an introduction, opening statements, and private and joint sessions. First, the mediator presents their credentials and explains the procedure to the parties. The parties then can give an outline of their case. In private sessions (caucuses), parties talk to the mediator in separate rooms. The mediator attempts to identify their arguments and the possibility of settling. Following caucuses, the parties gather in a joint session to discuss the matter openly, bringing offers and counteroffers. The mediator facilitates the negotiations without proposing or imposing solutions.
The mediator is a neutral third person (a retired judge or another professional). Mediators have subject matter knowledge and negotiation skills. The parties choose the mediator voluntarily by signing the agreement (unlike litigation where a state-appointed judge imposes a binding decision). In facilitating negotiations, mediators do not have decision-making authority.
Unlike litigation, mediation is a confidential process. All revealed during sessions stays out of the public. The parties agree to keep all shared information private, including future litigation.
The central aspect of the mediation process is its reconciliatory effect. Instead of engaging in a vindictive court battle, the parties negotiate disputed matters in a non-adversarial environment. The mediator seeks to reconcile contractual parties, helping them to continue their relationship after resolving the dispute.
Successful mediation results in settlement.
Relying on years of experience, our mediators have a deep understanding of contractual relationships and sophisticated negotiation skills. At Mediation Group, we facilitate negotiations, bringing reconciliation between you and your contractual partner.
Please call us today at 954-474-8700 to discuss how we can help. To book a mediation – please click on the following link.