Do you know what the financial cost of disputes is?
According to a report by WorldCC, almost half (47%) of buyers say that they measure the financial cost of disputes. Those that do measure, quickly realize how much escalated legal conflicts can actually cost.
The same report by World Commerce & Contracting, states:
“Even if we narrow calculations to only include direct costs and published data, the estimate (of economic costs caused by disputes) is almost $900bn.”
This guide is here to help you avoid wasting time and money and resolve arising contract disputes much quicker.
What is a contract dispute?
A contract dispute happens when people or businesses don’t see eye to eye on what a contract says or how it’s being carried out, essentially having a disagreement over anything relating to the contract.
It could be a conflict about payment delays, a breach of contract, or disagreements over what the contract actually means.
Such disputes or disagreements aren’t rare.
For example, in the construction industry, a report shows that a dispute happens once a month in more than 40% of contracts.
Why do disputes arise?
Okay, so contract disputes are quite common. But why do they arise?
Contract disputes often arise because people interpret contracts differently, fail to meet their obligations, overlook unclear terms, change their requirements, have a different view on the contract because of market conditions, and more.
Common types of contract disputes
Contract disputes can occur for many reasons, but some of the most common types of disagreements include topics of:
- Payment issues. A sensitive topic of money and payments is often the cause of some major contractual disputes. It can be because of delays or not completed payments, payment amounts and schedules, conflicts around bonuses and performance payments, partial or inaccurate completion of a service, provisions, and more.
- Breach of contract. When one party fails to perform its obligations as specified in the contract (or the other party is perceiving that is what happened), it may lead to a material breach of contract or a minor breach, depending on the seriousness of the situation. As the name suggests, a minor breach of a contract is when a rather insignificant part or term of the contract was not fulfilled—not affecting the overall satisfactory result. In turn, a material breach is when the failed-to-deliver term or requirement has been of significance, resulting in an unsatisfactory result overall.
- Different interpretations. Ambiguous language in a contract or simply general factors, like different thinking patterns, can result in disputes about the scope of work, deadlines, or specific deliverables. Both parties can interpret the terms of the contract differently, resulting in an eventual dispute.
- Performance disagreements. Parties may disagree on whether work was completed according to the agreed standards or timeline.
- Confidentiality and intellectual property issues. If a party discloses protected information or uses intellectual property in a way not specified in the contract, disputes often follow.
- Changes in circumstances. Market demand, inflation, market situation, business conditions, and many more external factors can also be a topic of a dispute surrounding a signed contract.
Besides these common reasons for arguing over a contract, one reason that may spark a thousand ones is… a poorly written contract.
From missing clauses that state what to do in light of a dispute arising, to ambiguous language, to poor structure, and unclear deadlines or payment details, can all leave room for different interpretations, creating fertile ground for arguments.
What happens when a contract dispute arises?
But what happens when a dispute does arise?
When a dispute does arise, both parties should do their best to simply…resolve it.
And, according to American Bar Association (a voluntary association of lawyers and law students), contract dispute resolution is:
“A term that refers to a number of processes that can be used to resolve a conflict, dispute or claim. Dispute resolution may also be referred to as alternative dispute resolution, appropriate dispute resolution, or ADR for short.”
As with many things related to contracts, resolving disputes can take significant time, and during this period, the parties involved often bleed money.
According to Weshare, it takes an average of 62 days to resolve a contract dispute. This means two months of potential operational delays, legal fees, and strained relationships.
But where to start?
Well, it’s best to start off small.
Contract parties should first attempt direct discussions to resolve the disagreement informally. Through clarifying misinterpretations or renegotiating terms to avoid escalation.
If that fails, the next steps may include:
- Negotiation: parties communicate to reach a mutually acceptable resolution without third-party involvement. Just like they negotiated before the contract was actually signed to discuss the terms and conditions.
- Mediation: when a neutral third party facilitates discussions to help the parties find a voluntary resolution.
- Arbitration: when a neutral third party hears evidence and makes a binding or non-binding decision, depending on what the contract specifies.
- Litigation: the most serious, aka, taking the dispute to court, which is often the costliest and most time-consuming option as well.
Some disputes escalate quickly, especially when one party feels wronged or financial stakes are high, while others can be resolved with early intervention and clear communication early on the line.
Even with careful planning, contract disputes can still happen, though.
As a WorldCC article says, you should actually expect them and be ready instead of hoping to be so prepared that a conflict will never arise.
Recognizing disputes early and taking clear steps can help you resolve issues before they escalate into litigation (taking the conflict to court) or damage your business relationships.
How to recognize a contract dispute?
So how do you recognize a contract dispute?
Because to take quick steps to stop things from escalating, you have to know the early signs of a disagreement arising.
Some common early signs of a potential dispute may include:
- Missed payments or repeated payment delays
- Small disagreements about the quality or scope of work delivered
- One party failing to meet a deadline without a clear reason
- Conflicting interpretations of key contract terms
- Silence or avoidance when discussing obligations
Ignoring these signs can turn a small disagreement into a larger, expensive dispute.
Let’s take a look at some common dispute scenarios and list out the early signs that could appear in them.
Contract disputes: common scenarios & early signs
Scenario 1: payment dispute in a marketing contract
Let’s imagine a small marketing agency completed a campaign for a client, but the client refused to pay, claiming the results did not match expectations.
The contract’s scope of work was vaguely defined, leading to differing interpretations of what “completion” meant.
Early signs:
In this payment dispute scenario, early signs that a contract dispute was brewing could include:
- Vague or inconsistent feedback from the client during the campaign, hinting they were unsure or unhappy with results.
- Delayed responses to status updates or invoices, suggesting dissatisfaction.
- Disagreements about campaign metrics, such as what constitutes a “lead” or “conversion,” without clear reference to the contract.
- Requests for additional work without acknowledging extra costs, indicating a misalignment on the scope.
Resolution:
The agency and client entered mediation and clarified the deliverables. They signed a settlement agreement using e-signatures, agreeing on partial payment and defining clearer terms for future projects.
Lesson:
Clear scope and deliverable definitions prevent disputes. If you handle contract disputes with mediation, you can resolve payment disagreements efficiently.
Scenario 2: breach of confidentiality in a software development agreement
A developer shared screenshots of a project on social media, breaching confidentiality terms in the contract. The client considered litigation due to potential IP exposure.
Early signs:
In this breach of confidentiality scenario, early signs that a dispute could arise might include:
- Requests from the developer to showcase work publicly before launch, indicating a lack of understanding of confidentiality boundaries.
- Lack of clarity during onboarding about what could and could not be shared externally.
- Developer expressing frustration about not being able to use the project in their portfolio, showing tension between personal branding goals and client confidentiality needs.
- Client noticing unapproved posts and issuing informal warnings, which, if unaddressed, could escalate.
Resolution:
Through negotiation, the developer agreed to remove the posts and signed an amended confidentiality agreement with clear penalties for future breaches.
Lesson:
Address confidentiality explicitly in contracts, and act quickly when a breach occurs to prevent escalation.
Scenario 3: dispute over interpretation of terms
A supplier and retailer disagreed on the interpretation of “delivery timeframe” in their business contract, with one party claiming delays justified withholding payment.
Early signs:
Here, the early signs of a dispute getting closer could be:
- Differing references to delivery timelines in emails, with phrases like “around two weeks” versus “no later than 10 business days.”
- Frequent clarifying questions from one party about expected delivery dates, indicating uncertainty.
- Partial shipments or missed update milestones without clear explanations or revised timelines.
- Invoices being delayed or partially paid with “pending delivery confirmation” as justification.
Resolution:
They opted for arbitration, resulting in a binding decision based on email evidence and contract terms, allowing both parties to move forward.
Lesson:
Precise terms reduce disputes over interpretations; arbitration can offer a faster resolution than litigation.
Resolving disputes with e-signatures: easier than ever (digital proof)
E-signatures aren’t just about convenience of signing contracts remotely, well that too, but they can also help you resolve contract disputes faster.
How exactly?
We’re here to tell you.
When a contract dispute arises, one of the first questions is whether there is a valid, enforceable agreement.
Using electronic signatures gives you a clear, easily accessible record of who signed, when, and on which version of the document via an electronic audit trail.
For example, Autenti issues a detailed electronic Signature Card for every document you sign with this e-signature platform, which you can easily go back to, even for archived contracts.
Such digital proof can help settle disputes quickly, reducing the need for drawn-out arguments about whether a contract was signed or which version was agreed upon. Forget about searching through a physical archive for that old, worn out contract you’ve signed months ago.
Many disputes arise from claims like “I never signed that” or “That wasn’t the final draft.” With audit trails provided by e-signature platforms, you can show:
- Exact timestamps of when signatures were applied (electronic audit trail)
- The email address and IP address used to sign
- The document version that was signed
Under laws like eIDAS in the EU, e-signatures are legally valid and enforceable, giving you confidence if a dispute escalates.
Additionally, when disputes do arise, parties often need to sign amendments or settlement agreements to resolve the issue. E-signatures allow these documents to be executed quickly, helping parties reach a mutually acceptable resolution without unnecessary delays.
How to avoid a contract dispute altogether? Prevention strategies
Knowing all about dispute types, common reasons, ways to resolve them, and ways to resolve them even quicker (with e-signatures)—you may now be wondering if there is a way to avoid them altogether?
And the answer is…probably no.
But that doesn’t mean you can’t try and be prepared to your best abilities.
Here’s how businesses and individuals can avoid costly disputes and protect working relationships (or at least try to).
1. Draft contract terms and clauses in a clear way
Ambiguous contract language is one of the top reasons contract disputes arise.
When writing or drafting your contracts, make sure to:
- Define key terms clearly (payment schedules, scope of work, deliverables, timelines).
- Include precise breach of contract clauses detailing what constitutes a material breach vs. a minor breach.
- Specify dispute resolution methods (negotiation, mediation, arbitration, or litigation).
- Address confidentiality, intellectual property rights, and termination conditions.
Make sure the language is understandable.
It’s also good to go through the contract with both parties involved and discuss terms and conditions mutually to make sure you’re both on the same page.
2. Negotiate effectively
Effective contract negotiation is essential for avoiding disputes. Before signing, take the time to:
- Clarify expectations with the other party to ensure alignment.
- Identify potential disagreements and address them upfront.
- Negotiate realistic timelines and payment terms to prevent disputes later.
- Document all negotiated points and include them in the final binding contract.
Good contract negotiation reduces misunderstandings that often lead to contract disputes.
3. Use electronic signatures
We’ve already mentioned electronic signatures are a great tool for resolving disputes quickly.
But they’re also a great tool for avoiding them altogether, and for the same reasons as before.
Because they create an audit trail, showing who signed, when, and from which IP address, providing evidence if a dispute arises. They support version control, ensuring all parties sign the correct version of the contract. And they’re completely legal and secure.
Resolve contract disputes quicker (or even avoid them) with Autenti
Contract disputes cost businesses time, money, and strained relationships—and they happen more often than you might think.
Poorly written contracts, unclear terms, and shifting expectations are frequent triggers, turning small disagreements into expensive conflicts that can take months to resolve.
So…don’t let vague contracts or unsigned terms cost you time and money.
Try Autenti free for 14 days and see how fast (and painless) resolving contract disputes can actually be.
