Renewing a contract can present risks to both sides

 The typical example of a lawsuit based on breach of contract will see one party allege that the other owes it money damages, the measure of which would be to put the non-breaching party into the position it would have been in had the breaching party performed its contract obligations as anticipated. These are known as "benefit of the bargain" damages. But sometimes a situation can arise in which both parties can claim that the other breached the contract, and these can make assessing a benefit of the bargain remedy more complicated.

As an example, let us consider a recent case filed in the U.S. District Court in Hammond, Illinois, in which two companies – a non-profit organization that provides transportation to people with disabilities and a company that it contracted with to provide buses – ended up in a contract dispute when their original contract term expired.

The trouble apparently started when the two sides could not seem to agree on whether or how to renew the agreement. The bus company claims that the parties agreed to a contract extension, but that while renewal negotiations were ongoing they were operating under the same terms and conditions as the expired contract. The non-profit company in its answer to the bus company's complaint disagrees, claiming that the original contract was not renewed and that both sides were engaged in an oral agreement that included different terms and conditions from the original agreement.

Both sides are claiming that the other owes money, the bus company claiming it is owed almost $300,000 and the non-profit arguing that instead the bus company owes it more than $8,000 under the claimed oral contract.

Negotiating a contract can be a delicate matter, but once it is concluded the parties to it should not become complacent that renewal of the agreement can be left to chance. Working with a law firm that practices in business and commercial law to agree on the terms of a renewed agreement or a new and different agreement before the expiration of the original contract can help to avoid misunderstandings that can get out of control, as it appears has happened in this case.

Source: The Chicago Tribune, "Arc argues it doesn't owe Illinois company $300K," Teresa Auch Schultz, July 28, 2015

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