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.

Small Business Lawsuits are a Common Occurrence

Business lawsuits, in general, are nearly an everyday occurrence. They run the gamut from contract disputes to discrimination. But here I want to address five of the most common small business lawsuits.

Before doing so, you should be aware, as a small business, how frequently lawsuits happen. A compilation of statistics by The Zebra shows:

• Business litigation impacts 36% to 53% of small businesses annually.
• Roughly 45% of small companies are in litigation.
• 90% of all companies experience a lawsuit at some point.
• Small companies face 12 million contract lawsuits annually.

Consequently, the more you're aware of the challenge, the better able you'll be to safeguard your business. Whether you have internal counsel or a commercial litigation attorney on speed-dial, a trusted legal resource is critical.

An attorney can provide counsel to minimize the potential for business disputes. And when the inevitable strikes, they can help guide you through the litigation process.

Commercial Lawsuits vs. Civil Lawsuits

Both types of lawsuits share similarities relating to legal procedures and remedies. However, their underlying causes and contexts differ significantly, highlighting the diverse legal landscape businesses must navigate.

Commercial Lawsuits

The most common small business lawsuits involve commercial lawsuits. Commercial litigation is civil litigation involving companies’ business interests as opposed to individuals pursuing consumer, household or personal claims.

Commercial lawsuits typically involve disputes arising from business transactions, contracts, or commercial relationships. These may include breach of contract claims, business torts, or conflicts over intellectual property rights.

Commercial lawsuits focus on resolving commerce, trade, or business operations conflicts. Generally, they involve parties seeking financial damages or specific performance remedies.

Civil Lawsuits

Civil lawsuits cover cases involving a broader range of legal disputes unrelated to commercial activities. These may include personal injury claims, property disputes, or family law matters.

Civil cases can involve individuals, businesses, or other entities. They seek various forms of relief, such as compensation for injuries, injunctions, or declaratory judgments.

The 5 Most Common Small Business Lawsuits

Businesses face many lawsuits, from contract disagreements to employee disputes and claims of intellectual property theft. Business litigation lawyers can help devise the best strategy for handling disputes.
The five most common small business lawsuits include:

1. Breach of Contract

Contract disputes, notably breach of contract, are generally the most common business-directed lawsuits. These suits can involve failure to deliver goods or services as per the contract or damaged goods. Contract issues can also involve failed payments or revealing trade secrets.

2. Discrimination

Small businesses can face discrimination lawsuits from employees and customers. More employees are suing their employers, mainly from increased enforcement by the Equal Employment Opportunity Commission (EEOC).
The most common employee discrimination claim is retaliation, representing more than half the cases. These cases can extend to disability, race, sex, age, equal pay, etc.

3. Wage Payment and Collection Law

Wage and hour laws can be local, state, or federal. Employees can file lawsuits against employers who violate any of these laws. Many lawsuits are about employers not paying enough money or extra money for hourly workers. Sometimes these cases involve bonus or commission disputes.'

Pennsylvania has one of the country's strongest Wage Payment and Collection Laws (WPCL).

4. Torts

Businesses often find themselves embroiled in tort lawsuits. They involve claims of wrongful acts that harm individuals or property. These lawsuits can arise from various scenarios:

Slip and fall accidents

Product liability claims

Negligence in providing services

5. Ownership Disputes

Partners, stockholders and other owners can disagree about purchase or sale agreements, bylaw violations, or compensation issues. While most partners would not expect to have a dispute when starting, these lawsuits are common in the business world.

Types of Businesses Facing These Lawsuits

Litigation affects businesses of all sizes. It might seem logical to assume larger corporations with expansive operations and deeper pockets are the prime target.

But as you've seen from the statistics, small and medium-sized Business (SMBs) are not exempt from lawsuits. And unlike larger corporations with in-house legal representation, small businesses have fewer resources. That makes handling legal issues even more challenging.

Your likelihood of a lawsuit varies based on numerous factors. But some industries are more susceptible than others. Common targets include:

• Construction
• Healthcare
• Service
• Technology
• Retail
• Manufacturing

So, if you own a business in one of these sectors, you'll want to prepare yourself to address common small business lawsuits.

Work with an Experienced Team of Business Litigation Attorneys

Our law firm works with companies in Bucks, Chester, Delaware, and Montgomery counties and represents nationally based businesses. Give us a call for assistance.

Michael A. Luongo, Esq. is a Bucks County attorney in the firm's business litigation, municipal, and criminal defense practices. Michael defends depositions, drafts and argues various motions, and serves as first and second chair in complex trials.

The business world faces challenges, with legal issues just one. And for small to mid-sized businesses (SMBs), one of the gravest threats is a lawsuit. Some 12 million contract lawsuits are filed yearly against small businesses. You must have some notion of how to avoid lawsuits.

Large corporations might have the capital to weather corporate law and business litigation. But for SMBs, it could present a significant concern if it does not spell the end of your business. Fortunately, there are proactive steps you can take as a small business owner to protect your venture from commercial litigation.

One of the best first steps is arming yourself with an experienced business lawyer near you. They can work with you to put the necessary protections in place to reduce your chances of a lawsuit.

Avoiding Business Law Compliance Concerns

As a small to mid-sized business owner, you might wonder, "Why is compliance so vital?"

First, adherence to business regulations isn't just a matter of legality; it's about credibility. Compliance builds trust among clients, customers, and partners to show that your business operates with integrity and respect for the rules.

Second, staying compliant prevents financial penalties, disruptions, and legal challenges.

Two of the more common business regulations involve zoning and permits.

Zoning Ordinances

A zoning ordinance regulates how you can use a property in a specific location, typically involving areas within counties and cities. In these areas, local governments may regulate and limit the activities in the jurisdiction.

For instance, nearly 60% of Pennsylvania townships and boroughs have zoning ordinances dictating permitted use. So, your small business in Montgomery or Bucks County likely has different requirements than another across the state.

SMBs must be diligent in ensuring their operations adhere to these regulations. Otherwise, you can face legal consequences, including:

• Criminal penalties, including fines or jail time.
• Civil penalties that prevent the zoning violation from continuing.
• Withholding of permits

Licenses and Permits

In addition to zoning ordinances, your business may require various licenses and permits. Failing to secure the right ones can lead to hefty penalties or closures. So, you must consult with local authorities or a business attorney to ensure you're up to date.

How to Avoid Lawsuits from Employees

Employees are the core of every business. The relationships you build with them can make or break your enterprise, especially for SMBs.

Fostering a positive work environment is crucial to productivity and morale. Equally important, it's a critical shield to avoid lawsuits.

The dangers of neglecting employee relations are vast and sometimes devastating. Three of the most common employee lawsuits include discrimination, wrongful termination, and wage violations.

Understanding and safeguarding your human resources is more than just good business practice. It's a must to navigate the complex legal landscape of today.

Here are some other steps you can take to avoid having to hire a commercial litigation attorney.

Training and Educating Employees

Informed employees are your best assets in lawsuit prevention. Regularly train them on company policies, harassment prevention, safety protocols, and more. This not only empowers them but also safeguards your business.

Open Communication Channels

Foster a culture where employees feel free to voice their concerns. Open communication can nip potential issues before they escalate into more significant problems or lawsuits.

Workers' Compensation

One of the essential concerns relating to employees is workers' compensation. It's a requirement for employers in Pennsylvania, regardless of size. Otherwise, you risk civil and criminal penalties.

In addition, you may also be responsible for reimbursing the Uninsured Employers Guaranty Fund, including costs, interest, penalties, and other fees. Your employees can also file a lawsuit in state or federal court against you if you are uninsured.

Employment Contracts and Noncompetes

Clear employment contracts are essential. They lay out the expectations, roles, and potential severance conditions.

Restrictive covenants can be helpful if you're concerned about employees leaving and joining competitors. However, these agreements must be reasonable regarding length and scope to be enforceable.

Legal disputes can arise from employers against employees violating the contract. Conversely, employees can sue your business for unfair requirements within a noncompete agreement.

Noncompete litigation is typically fast-paced and expensive. You must act quickly if you suspect an employee or former employee is violating a noncompete agreement. Confirming sufficient factual support is critical before starting the litigation process.

How to Avoid Lawsuits During Business Formation

It's essential to separate personal and business assets.

Imagine this: Your business faces a lawsuit, and your assets, like real estate or your car, are at risk. Creating a legal distinction between your business and personal assets is crucial. And you can do that when you start a small business.

Choosing your business structure is your first critical concern as a small business owner. The form you select impacts everything from taxes and business control to operating costs and liabilities.

For example, forming an LLC or a corporation removes personal liabilities. Hiring a business lawyer is a wise investment during business formation. It helps ensure you avoid legal pitfalls down the road.

How to Avoid Lawsuits Involving Your Personal Life

Unfortunately, the line between our personal and professional lives often blurs. And that's especially true for small to mid-sized business owners.

Of all personal matters, divorce is likely the most severe threat to your business, especially with high assets.

Marital property typically includes assets acquired during the marriage. Moreover, personal premarital assets can convert to marital property over time. So, if you formed your business during the marriage, it's marital property.

That applies even if your spouse doesn't own any part of the business. Consequently, a spouse can claim a share of the company's value in a divorce.

Consider drafting a marital agreement that clearly defines business ownership. It can go a long way to preventing your business from becoming a point of contention in a divorce. It's also wise to avoid mixing marital funds with business funds.

Good Documentation Can Help Avoid Lawsuits

In a lawsuit, well-maintained records can be your most vigorous defense.

Keep accurate records of all business transactions, employee training, safety measures, and customer interactions. If someone claims you, you have evidence to validate your story.

Regular Legal Audits Help Avoid Lawsuits

Think of legal audits as health check-ups for your business. It's best to get into the habit when you start a business. Consulting with a business lawyer can help you identify and address potential concerns.

Spending money on legal help initially is much cheaper than paying a business litigation lawyer later.

Consider Insurance as a Safeguard Against Lawsuits

Insurance cannot help you avoid a lawsuit, but it can assist you if someone hits you with one. It offers a safety net and a shield against these unforeseen challenges. We already mentioned workers' comp insurance as mandatory. But here are some other insurance types worth considering to protect your business:

1. General Liability Insurance: It covers legal fees and damages for lawsuits like injury or property damage.
2. Professional Liability Insurance: This insurance protects against legal claims arising from professional errors, negligence, or contract breaches. For instance, if a consultant offers advice that leads to a client's financial loss, this insurance can cover the legal fallout.
3. Product Liability Insurance: If you sell a product, you run the risk of that product causing harm. In addition, the product may not meet its promised standards. This insurance protects against lawsuits from product-related issues, ensuring that one defective batch doesn't spell doom for your venture.
4. Cyber Liability Insurance: In an age where businesses increasingly operate online, cyber threats are real and potent. This insurance protects companies against lawsuits from data breaches or other cyber incidents. For businesses that handle sensitive customer data, this is becoming increasingly non-negotiable.

Our Business Litigation Attorneys Can Help

Regardless of how carefully you try to avoid a lawsuit, it's almost inevitable. Reports from various sources indicate that up to 53% of small businesses face a suit annually. And 90% of all companies experience a lawsuit at some point in their lifespan.

If that happens to your business, call our Doylestown or Norristown law offices and talk with our experienced business litigation attorneys. They'll help you address any legal action and get the desired results.

Business contracts are the core of any successful business, regardless of size. They serve as legally binding agreements that protect the rights and interests of all parties. Moreover, they're critical for even the smallest business owner. So, it's worth spending the time and expense to consult a contract lawyer on your most essential business contracts.

Every contract needs to outline the terms and conditions of a business relationship. For example, it provides a framework for doing business and helps prevent disputes. In addition, contracts establish expectations, responsibilities, and obligations to provide a solid base where trust and professionalism can thrive.

Contracts are ensure that all parties are on the same page. Moreover, they also offer legal protection when conflicts arise. They also provide a means of recourse and a clear path for resolution in the event of a breach of contract.

Ultimately, contracts bring a sense of security and stability to business transactions. And that enables small business owners to focus on growth and success while avoiding legal concerns.

Types of Essential Business Contracts

As a small business owner, having solid relationships with clients, vendors, employees, and partners is critical to success. However, relying only on verbal agreements or informal understandings can leave your business vulnerable to misconceptions, disputes, and legal issues. That's where business contacts are valuable.

These agreements provide clarity, protection, and peace of mind by outlining all parties' rights, responsibilities, and expectations. It's best to consult a contract lawyer near you to address and clarify the following business contracts.

Client Business Contracts

These contracts are vital for service-based businesses, as they outline the terms of your engagements with clients. So, key elements should include:

• • Scope of work
  • Deliverables
  • Payment terms
  • Project timelines
  • Termination clauses
  • Dispute resolution options

These service contracts should also include clauses for intellectual property rights, confidentiality, indemnification, and limitation of liability.

Vendor Business Contracts

Vendor contracts spell out the terms of your relationships with suppliers and service providers. As a result, this essential business contract should include:

• • Pricing
  • Delivery schedules
  • Quality standards
  • Warranties
  • Termination

When negotiating vendor contracts, get several bids. You should also consider long-term agreements for better pricing.

Employee Offer Letters

An employment offer letter defines work terms. Including one with any new hire is vital, regardless of position.

Key elements include:

• • Position title
  • Start date
  • Compensation package
  • Benefits
  • Working hours
  • Probation period, if applicable

You'll also want to mention any considerations in this essential business contract, such as background checks or references. Additionally, clarify the at-will employment relationship unless specific employment terms or agreements exist. If you have an employee handbook, you must also ensure they receive and sign a copy.

Partnership Agreements

An operating agreement is crucial if you're entering into a partnership. Consequently, this essential business contract must include these elements:

• • Capital contributions
  • Profit distribution
  • Decision-making processes
  • Roles and responsibilities
  • Dispute resolution methods
  • Withdrawal from Ownership
  • Buyout terms

Including dispute resolution and termination clauses provides a framework for resolving conflicts with business partners.

Non-Disclosure Agreements (NDAs):

NDAs protect your sensitive information when sharing it with external parties, such as contractors, investors, or potential partners. Key items include:

• • Definition of confidential information
  • Purpose of disclosure
  • Obligations of the recipient
  • Duration of the agreement

To enforce NDAs, clearly identify what represents a breach. You can consult with a contract attorney to present remedies if violations occur.

You might also consider other employment agreements like restrictive covenants relating to non-solicitation of customers, employees, or vendors.

Independent Contractor Agreements:

If your business engages independent contractors, it's crucial to have an explicit agreement in place. Generally, key provisions with this type of contract include:

• • Description of services
  • Compensation terms
  • Project timelines
  • Intellectual property rights
  • Termination clauses

You should specify that the contractor is not an employee and clarify the contractor's responsibility for taxes and benefits. In addition, include confidentiality and non-compete clauses to protect your business's sensitive information. A release of liability may also be prudent.

Drafting and Enforcing Essential Business Contracts

With templates on the internet, you can draft these essential business contracts yourself. Unfortunately, that's not always the best course of action. So, seeking legal advice ensures that your agreements meet state and local laws and protect your interests. An experienced contract lawyer can provide valuable insights and tailor contracts for your business.

Once complete, ensure that all parties sign the contracts. Keep copies of completed contracts in physical and digital formats. Maintaining proper records helps you reference agreements when needed. It also helps enforce the process if disputes arise.

Contracts need enforcement to be effective. So, regularly monitor compliance with contractual obligations, such as payment schedules and performance milestones. If a breach occurs, consult your contract attorney to understand the available remedies. They'll advise you on the steps to take to protect your rights.

Contract Lawyers Serving Bucks and Montgomery Counties

Our law firm has offices in Norristown and Doylestown, PA. Our business and contract attorneys help companies of all sizes and types, from small main street businesses to multi-national companies. Plus, our broad offering of legal services ensures you'll have experienced counsel regardless of your legal concern.

Call our law offices for any business concern - we are here to help.