5 Common Types of Business Disputes That Tend To Start Lawsuits

By: Christopher S. Berry
Business Partners Disagreeing - Common Types of Business Disputes

When disagreements arise between businesses, money and reputation are often on the line. And, if they require legal assistance to resolve, they fall under the umbrella of commercial litigation. In this post, we describe five common types of business disputes you could face with a variety of business partners.

1. Breach of Contract

Contract breaches are the most common type of commercial dispute. Most breaches occur when a business doesn’t pay for the goods or services they receive. Customers may be dissatisfied, have lost their financial standing, or the provider may have lost its ability to satisfy the terms of the agreement.

When evaluating whether a contract has been broken, your attorney will analyze the following questions:

  • Did a contract exist?
  • What were the requirements and terms of the contract?
  • Did the contract include modifications?
  • Did a breach occur? Was the breach material to the contract?
  • Is the contract enforceable?
  • What, if any, damages are due to the wronged party?

To pursue a claim for breach of contract, you must file suit within six years under Michigan law.

The six-year countdown begins on the date the breach happened, not when you discover it. If you don’t act with the statute of limitations, your claim will not stand in court.

Speak to an attorney if a business is trying to hold you responsible for terms outside your agreement or is violating its contractual obligations.

2. Ownership Disputes

In organizations with multiple owners, conflicts may arise about operations, growth strategies, and owner rights. Accusations may include:

  • Squeezing an owner out
  • Denying ownership or member oppression
  • Self-dealing
  • Misappropriating funds
  • Withholding money or statutory conversion
  • Breaching contracts or fiduciary duties

Generally, Michigan law has a three-year statute of limitations for these types of claims, beginning on the date the action happened. In member oppression cases, individuals have three years from the cause of action to file a suit or two years after they discover it, whichever occurs first.

A 2023 Michigan Court of Appeals case, Balsamo v Dalcoma Property, LLC, is a prime example of a business dispute between a former owner and a business. Claims range from member oppression to breach of contract to fraudulent misrepresentation. The case shows the importance of knowing what constitutes a cause of action and filing within the statute of limitations. Find out how the court ruled.

3. Business Torts

There are several types of business torts (aka wrongful acts) that may spur legal action.

  • Defamation – statements that damage one’s reputation through slander (spoken) or libel (written)
  • Tortious interference – the deliberate and unlawful interference with a company’s contracts or business relationships
  • Restraint of trade – meddling with a business’s ability to operate freely, including forming contracts that will prevent a business from operating as normal
  • Unfair competition – unfair conditions that help one business and hurt another

If you think any of these tactics apply to your business, consult a lawyer.

4. Intellectual Property Claims

Another type of business dispute involves intellectual property. Who is the rightful owner of patents, copyrights, trademarks, and trade secrets? What if you outsource product development and creative work or tap an employee to create training materials? Disputes over intellectual property arise when a business believes it owns the assets and the “creator” disagrees or when a company believes its competitor is stealing its intellectual property.

Whether defending or making any intellectual property claims, be prepared to prove ownership and what you’ve done to protect your assets.

5. Insurance Coverage

Occasionally, businesses face insurance coverage issues with their insurance providers. A business submits a claim; it’s denied. What next?

Insurance coverage disputes are commonly handled through declaratory actions where the insured (policyholder/business) brings its claim and insurance policy before the court. After reviewing both sides’ positions and the policy, the court decides whether there is coverage. If you want to set yourself up for success, consider consulting your lawyer before and while filing the initial claim.

When it comes to business disputes, we recommend two tactics: prevention and swift action. To prevent future disputes, use your legal team early and often. Ask them to review or draft your agreements for clarity and soundness. Monitor your company’s activities to avoid risky or harmful outcomes. Finally, act quickly if you’ve been wronged and think you need legal support. You don’t want to fall outside the applicable statute of limitations.

About the Author

Christopher Berry is a litigator with more than 15 years of experience. He regularly represents businesses, individuals, insurers, and insureds in pursuing and defending a wide variety of claims. Chris earned his Juris Doctor from Wayne State University Law School.  

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Smith Haughey’s attorneys can draft and review corporate agreements, protect your intellectual property, and litigate a wide range of business disputes.