(US law/generally) Hopefully you’ll never find yourself in litigation, but sometimes, it’s inevitable. It’s important, then, that you understand a few of the more common types of commercial litigation cases. If you find yourself in a case, chances are that your case falls into one of the three most common categories:
Breach of Contract
In a contract, two parties agree to certain obligations in some sort of exchange. For example, a Florida builder and a homeowner can agree to a contract for a home renovation where the builder will complete certain renovation tasks, and the homeowner will send monthly payments for the work in a pre-discussed amount. If the builder doesn’t do something he agreed to or the homeowner stops sending monthly payments, there is a breach of contract. A breach of contract is generally only excusable if the contract is void. This can happen for one of the reason listed below:
- One of the parties agreeing to the contract was a minor (under 18)
- One of the parties lacked mental capacity to make a contract
- One of the parties was under duress or undue influence to sign the contract
- One of the parties knowingly withheld information that the other party needed to know to make an informed decision and could not reasonably discover on their own
- The purpose of the contract itself was illegal (such as selling illegal drugs or firearms)
- Something has happened that makes it impossible to fulfill the obligations of the contract
- The contract changed; some obligations were removed and others were added
With tortious interference, a person or business in a contract can sue a third party if that third party knowingly interfered with the contract to cause a breach, and that breach resulted in damages to one or both parties. This third party could have interfered by encouraging, threatening, or coercing one of the parties to breach the contract, or they could have made it impossible for one or both parties to fulfill the obligations of the contract. A common occurrence with this type of commercial litigation is when an employee under a non-compete clause breaches their contract and works with another company. In this case, the employer with the non-compete clause may be able to sue the employee for breach of contract and may also be able to sue the company the employee worked with for tortious interference.
Corporate disputes involve a lot of different cases, including:
- Business Divorce
While these cases can be held in court, a growing number of contracts require that companies first try arbitration or mediation before filing in the court room. Mediation involves both parties voluntarily coming before a partial third party. There is generally a time of preparation, an initial joint session, initial private sessions, subsequent joint sessions, and a closing which involves a formal settlement. With mediation, one party can disagree with the settlement and decide to take the case to court. With arbitration, the process is more formal, the final decision is usually binding, and the outcome cannot be appealed. Have you encountered/been involved in another type of commercial litigation?