Businesses and companies of all sizes can sometimes face various types of legal disputes. These disputes can end up as business litigation if the misunderstandings are not settled in the meantime.
Business litigation can be a lawsuit between two companies (i.e., customer and vendor), a business and a customer, employee and employer, and even between business partners. In general, all business disputes revolve around a particular contract or a business relationship where one or both involved parties seek monetary damages because of the failure in performance from the other party. Other than tangible assets, business disputes can also relate to intangible property or intellectual property like patents or trademarks.
If this is all new to you, you’re at the right place. In this brief article, we’ll go through the most common types of business litigation so that you’re well prepared with knowledge if you ever find yourself tangled up in business litigation.
Table of Contents
Breach Of Contract
To begin with, the most frequent type of business litigation is because of a breach of contract. In this type of business litigation, the parties have entered into an agreement, either oral or in most cases written, and one party failed to perform the obligations agreed in the contract thoroughly.
To institute a breach of contract claim, through their business litigation attorneys, the Plaintiff must prove the existence of a valid contract, an apparent failure to perform by the other party and demonstrate the harm caused by the inability to perform. For example, the failure to perform could address a failure to provide services, pay for goods, deliver a purchased product, failure to meet delivery timelines, or the failure to follow a material term in the contract.
During the litigation, the contract terms are first loudly read, explained, and interpreted by the judge to determine the parties’ responsibilities, unless any of the parties argue that the contract terms are ambiguous and vague. Then, under U.S. law, the winning side can demand recovery of their attorneys’ fees.
Fraud
If there’s a contract in a given business relationship, the contract commonly controls that entire business relationship. Nonetheless, a party can commit fraud regarding the agreement that may allow the other party to file a claim in a business litigation lawsuit.
To prove an eventual fraud, Plaintiff needs to prove that the other party made a false material representation, that Plaintiff trusted on the false declaration to enter into the transaction, and that the presentation forthwith produced Plaintiff harm.
Fraud is more difficult to prove than a simple breach of contract in most cases. The false representation needs to be material, and it must be a statement of fact and not an opinion. A good example of fraud is if someone sells you a computer and states that it comes with the latest i9 processor, but in reality, it has an outdated i5 instead. In this case, you can rely on the seller’s statement that the computer was equipped with the latest processor, their statement was false, and the received computer was not as good as it was initially represented.
In such a case, the winning party cannot recoup their attorneys’ fees but can ask for an award of exemplary or punitive damages as a punishment if the fraud was committed intentionally, knowingly, or with malice.
Partnership Disputes
A business partnership can be like a marriage or a family; as long as everyone is healthy and happy, it thrives and flourishes. However, once adversity strikes, partners can have different ideas on moving forward, blaming one another, or deciding not to move forward.
Unlike family, business partners may not have the necessary tools to “weather the storm.” Difficulties may arise when one partner is breaching their fiduciary duties, and the other partner or partners discover the terrible acts. Once this happens, the partners will need to find a way to “divorce.”
If the company was formed correctly, the business will have either a company agreement or bylaws controlling how the eventual split up should occur. Moreover, the partners have also entered into a buy-sell agreement that gives clear direction on ending their business relationship.
However, if there’s no such agreement, the former partners can file suit to have the Court decide how to split up the company. Usually, these business litigation disputes are costly and involve numerous expert witnesses to address the valuation of the business and how to distribute the business.
Final Thoughts
By their nature, business litigation disputes are complicated and can implicate many State laws. For that reason, if you ever find yourself in the position to be a concerned party in such litigation, you must work with a qualified attorney to guide you through the intricate litigation process.
