Contract disputes often lead to litigation. A contract is a legally binding written document that governs the rights and obligations of the parties to the contract. There must be what is referred to as “consideration” for a contract to be enforceable. That means that that there must be a benefit or exchange between the parties for a contract to be enforceable. A gift that is not actually given is not an enforceable contract in most cases because there is a lack of consideration. Even if a contract is in writing, a court may find that it is unenforceable if the contract is vague, subject to different interpretations or was entered into when one of the parties was under duress. Further, a contract may not be enforceable due to misrepresentation, unconscionability or failure to be provided with a reasonable opportunity to obtain independent legal advice. There are many factors to consider when determining whether a contract or oral agreement is enforceable. When there is a contract in dispute, the first job of the lawyer is to review the contract and assess the circumstances surrounding it in order to give advice as to whether a contract is enforceable. Many contracts are poorly written, which leads to disputes later on.
In this era of international or interprovincial business, some contracts may specify the jurisdiction that a contract is to be governed by. You can start a lawsuit in Ontario if one of the parties is located here and there is a substantial connection to Ontario, even if the contract states that it is governed by the laws of another place. For instance, many insurance contracts state that their contracts are to be governed in accordance with Bermuda law even though the insurance policy owner resides in Ontario. In that case, the lawsuit may still be permitted to proceed in Ontario and the plaintiff’s lawyer would hire an expert in Bermuda law to provide a written opinion on the application of Bermuda law in the case.
Some contracts have an arbitration clause. Arbitration is like hiring a private judge (an arbitrator) who decides the case. The arbitrator will set up a timetable for certain steps to be taken in a case, similar to what the court does. If the case does not settle, then there will be an arbitration hearing where the arbitrator eventually renders a written decision.
People often ask if an oral agreement is binding. The answer is that an oral agreement can be enforceable, just like a written agreement. If the parties had an oral agreement and conducted themselves in a manner consistent with that oral agreement, then a court can enforce the oral agreement. This can be contradicted by emails or behaviour to the contrary, so it depends on the facts of each case as to whether an oral agreement is enforceable. Crangle has successfully sued on many oral agreements.
If you are a company, it is worthwhile to have your current contracts reviewed by Crangle to improve enforceability. Further, any important contracts with other companies can be reviewed before signing. A little due diligence can prevent big problems and costs down the road.