Enforcing Business Contracts in Pennsylvania

Business contracts are fundamental to your operations, ensuring agreements between parties are clear and enforceable. Unfortunately, disputes are inevitable in doing business, even with seemingly rock-solid agreements.

Contract enforcement is crucial to maintaining healthy business relationships and avoiding legal disputes when those issues arise.

Enforcement ensures the parties honor the deal's terms and conditions. When one party fails to fulfill their obligations, the other party can seek legal action to enforce the terms. This process can involve negotiating a resolution, mediating disputes, or pursuing business litigation.

The more precise your terms and conditions are, the fewer chances you have of issues. Nonetheless, there's no guarantee. So, how do you go about enforcing a business contract in Pennsylvania?

Enforceable Business Contracts and Governing Laws

Let's start with the fact that contract laws enforce some, but not all, business agreements. Enforceable contracts include those that are:

• Written: A legally binding agreement between two or more parties outlining each party's rights, responsibilities, and obligations. When parties sign a written contract, they agree to act per the document's terms.
• Oral: An agreement between two or more parties through spoken communication, but not written and signed. The parties can create such an agreement in person, on the phone, or spoken.
• Implied: A legally binding agreement created by the actions, behavior, or circumstances of the parties involved without written proof.

The Pennsylvania Uniform Commercial Code (UCC) and Title 13 govern business transactions involving the sale of goods. Other business agreements are subject to Pennsylvania statutes, common law, and private law.

Moreover, PA includes a four-year statute of limitations for most breach of contract issues.

Unenforceable Business Contracts

As mentioned, certain business agreements may not be enforceable under the law. They include the following:

• Illegal: Agreements involving illegal activities.
• Minors: Generally unenforceable unless they include necessities.
• Unconscionable: Grossly unfair Agreements.
• Lacking Mutual Consent or Consideration: Agreements without a clear mutual understanding or valid value exchange.

Each of these provides a valid defense should a dispute arise.

What Makes a Contract Legally Binding?

The agreement must have the necessary elements and follow state laws such as the UCC to be legally binding.

In Pennsylvania, agreements can be written, oral, or implied. As mentioned, the law enforces oral or implied contracts. However, written contracts provide clear evidence of the agreement's terms, making them preferable. The adage states, "Make sure you get it in writing."

What are the Essential Elements of a Business Contract?

A contract requires several legal requirements to be valid and enforceable:

• Consideration: The parties must exchange something of value. Without such an exchange, there is no agreement.
• Offer and Acceptance: One party must make an offer, and the other must accept it.
• Mutual Consent: Both parties agree to the terms without coercion. Contract law often refers to this condition as a "meeting of the minds."
• Competence: The parties must have the legal capacity to agree.
• Legal Purpose: The agreement's subject matter must be legal and not against public policy. For example, you might enter into a contract to have a party kill someone. Fortunately, the law won't enforce the agreement.

A business contract may be voidable even with these essentials in place for a legally binding contract. For instance, courts can void the contract if a party can prove a lack of consideration.

How Can You Enforce a Business Contract in PA?

Your first step is to ensure your agreement is legally binding by addressing the above considerations.

As a small business owner, it pays to involve a contract lawyer with your most critical agreements. They can ensure you cover all the essentials in the contract terms, identify potential concerns, and include clauses to address them.

The same holds before signing a contract. A contract attorney can identify potential concerns to protect your interests.

As mentioned, even the most clearly drafted agreement can lead to a dispute. If that happens, you can take steps before moving to business litigation.

Here are some options for enforcing a business contract.

Negotiation

You can attempt to resolve disputes directly, aiming for a mutually agreeable solution.

Alternative Dispute Resolution

Alternative dispute resolution (ADR) provides various options for handling business conflicts. Most importantly, it does so without using the court system.

ADR programs such as arbitration and mediation excel at getting flexible and cost-effective results. Equally important, they help retain business relationships.

Business Litigation

Preferably a last resort, you can file a lawsuit where a judge will determine the outcome. You'll want to work with an experienced business litigation attorney.

Legal Remedies for Business Contract Disputes

When moving to litigation, several legal remedies are available to enforce the agreement or compensate for losses.

Compensatory Damages

The most common remedy for a contract breach is compensatory damages. Typically, damages cover direct losses and costs incurred from the violation.

Specific Performance

Specific performance is a legal remedy that compels the breaching party to fulfill its obligations under the agreement. This remedy is used when monetary damages are insufficient to address the harm caused by the breach.

Rescission and Restitution

Rescission allows the non-breaching party to cancel the agreement and revert to its state before the agreement. Restitution may require the breaching party to return any benefit it received from the business contract.

Punitive Damages

Courts may award punitive damages to punish a party for egregious behavior. However, punitive damages are rare in business contract disputes.

Liquidated Damages

A liquidated damages clause specifies a predetermined amount of money a party must pay in case of a breach. This amount is usually an estimate of potential losses in case of a violation.

Common Defenses for Breach of Contract

You've seen some means for enforcing an agreement. But what about voiding one? These are some potential defenses when facing a breach lawsuit:

• Fraud: Misrepresentation or deceit by one party.
• Duress: Forcing someone to agree by threat.
• Mistake: A mutual misunderstanding of a fundamental fact.
• Lack of Capacity: One party lacks the legal ability to enter into the commitment.
• Public Policy: Agreements that violate public policy or involve illegal activities are unenforceable.
• Force Majeure: Unforeseeable circumstances that prevent someone from fulfilling the contract.
• Unconscionability: Arrangements grossly unfair to one party and therefore unenforceable.

Again, the statute of limitations for contract enforcement in PA is typically four years.

Experienced Contract Attorneys That Focus on Results

Understanding and enforcing contracts is vital for Pennsylvania business owners. Well-drafted agreements protect your interests and provide a clear framework for resolving disputes.

Our contract attorneys serve small and large business clients locally in Bucks, Delaware, and Montgomery Counties. However, they also support companies in the greater Philadelphia area and nationally.

Don't let contract concerns impact your business. Our attorneys have the experience to protect you whether you are enforcing or defending against a business contract.