Contract Disputes Involving Pricing and Fees: When One Party Claims Underpayment

Among the various types of disputes businesses can face, pricing and fee disputes are among the most common. If one party claims underpayment and the other party claims that it has paid what it owes or that no payment is due, there is a high likelihood that the parties’ dispute will lead to litigation. In this scenario, avoiding unnecessary costs, liabilities, and risks involves working with an experienced Miami breach of contract lawyer who can help you make informed and strategic decisions.

Common Reasons for Contract Disputes Involving Pricing and Fees

Contract disputes involving pricing and fees can arise for a variety of different reasons. When facing these disputes, a key first step toward making informed and strategic decisions involves identifying the specific reason why the parties are in disagreement. Some examples of common reasons for these disputes include:

Ambiguity Regarding the Amount Owed

One common reason for disputes involving pricing and fees is ambiguity regarding the amount owed. If a contract’s language isn’t clear, or if the parties don’t have clear documentation of the amount due, this can leave the parties facing a fundamental disagreement without a clear path forward. Some examples of scenarios in which this can occur include:

• The contract does not clearly specify how pricing or fees are calculated
• The contract is ambiguous regarding volume discounts, rebates, or other similar terms
• The parties do not have adequate documentation to accurately calculate the fees due

The latter scenario is common in cases involving franchises, licenses, and other contracts with percentage-based fees. For example, if a franchisee owes a monthly royalty of three percent of gross revenue, both parties will need clear and comprehensive documentation of the franchisee’s gross revenue in order to confirm how much is owed. If the parties’ contract does not clearly define “gross revenue,” or if it arguably excludes certain sources of income, this could lead to a dispute as well.

These are just two of numerous possible permutations. Ultimately, if any ambiguity exists regarding either party’s financial obligations, there is a high likelihood that litigation (or an alternative dispute resolution mechanism such as mediation or arbitration) will be necessary.

Ambiguity Regarding the Due Date

Ambiguity regarding due dates can lead to payment-related disputes as well. In many cases, due dates can have a significant impact on both parties’ cash flow. As a result, if one party is expecting payment when the other isn’t prepared to pay, this could have serious financial ramifications.

This type of ambiguity can either result from issues with a contract’s language or from questions regarding whether a party’s payment obligation has been triggered. In either scenario, a dispute can lead to a declaration of default, and if the party expecting payment cannot afford to wait, then immediate legal action may be necessary.

Disagreements Over Whether the Party Seeking Payment Has Adequately Performed

Oftentimes, disputes regarding one party’s payment obligations will arise out of disputes over whether the other party has adequately performed. Under a construction contract, for example, a contractor may be entitled to a progress payment upon “substantial completion” of a key phase of the build. If the parties disagree over whether the phase has been substantially completed, this can lead to a dispute regarding payment as well.

The Delinquent Party’s Inability to Pay

Pricing and fee disputes can also arise out of the delinquent party’s inability to pay. If a party isn’t paying because it doesn’t have the financial resources to do so, this is a very different scenario from those discussed above. In this case, the issue isn’t whether payment is owed (or how much is owed), but rather the fact that the defaulting party cannot meet its contractual obligations.

If a delinquent party is truly unable to pay, then both parties will need to carefully weigh their options in order to decide how to proceed. Crucially, for the non-delinquent party, non-payment doesn’t necessarily mean that non-performance is justified. In this scenario, the non-delinquent party may need to consider its options for pursuing collection, and the delinquent party may need to consider options such as filing for bankruptcy or pursuing an assignment for the benefit of creditors.

The Delinquent Party’s Refusal to Pay

If the delinquent party is capable of paying but refuses to do so, this is a very different scenario as well. Here, the non-delinquent party may have additional grounds to pursue legal remedies in court. Refusal to pay can give rise to fraud-based claims, among others, and it can often provide clear grounds for non-delinquent parties to pursue claims for damages.

Key Steps to Take When Facing Payment-Related Contract Disputes

Regardless of the specific issue at hand, when facing a payment-related contract dispute, it is important to promptly take the steps necessary to protect the company’s financial interests going forward. These steps include (but are not limited to):

• Reviewing the Relevant Contract Language – As with any contract dispute, the first step is to review the relevant contract language. This includes not only the language regarding performance and payment, but the language regarding dispute resolution as well.
• Documenting Potential Claims and Defenses – Both parties should do what they can to document their claims and defenses. Depending on the circumstances, this may include preserving any documentation that is relevant to the parties’ dispute, conducting a forensic audit, and/or gathering evidence through other means.
• Deciding How Best to Proceed Under the Circumstances at Hand – Based on the information and evidence that is available, both parties should decide how best to proceed. Whether this involves negotiating, pursuing mediation or arbitration, or going to court will depend on the circumstances at hand.

Schedule a Call with a Miami Breach of Contract Lawyer at Edelboim Lieberman

If your company is facing a payment-related contract dispute, our lawyers can help you make informed and strategic decisions about your next steps. To schedule a call with an experienced Miami breach of contract lawyer at Edelboim Lieberman, please call 305-768-9909 or get in touch online today.