The SLG Team Handles Your Company’s Delaware Contract Disputes
Contracts are the engine of any business. You rely on them to lock in pricing, secure talent, and guarantee that the companies you buy are actually worth the purchase price.
But just because a promise is on paper doesn’t mean it will actually be made. Vendors can miss deliveries, which can shut down your production line. A business trying to acquire your company might experience “buyer’s remorse” and try to back out. A former executive can steal your client list and set up shop right next door, even though they signed a non-compete agreement. Unfortunately, just because someone promised not to do something doesn’t mean they’ll keep to their word.
If you are dealing with a broken agreement or contract violation, you need immediate legal intervention to stop the damage and enforce your rights. At Shlansky Law Group, our Delaware contract disputes team is here to quickly step in and protect your business interests. Call us today at 347.378.6990 for a confidential consultation.
What Makes Delaware Different for Contract Disputes
In nearly every other state, judges look at contract disputes and try to figure out what is “fair” to both sides. For example, if a big business and a small business reach an agreement, the judge might think the small business was coerced or did not have appropriate “bargaining power” to properly negotiate with the big business. This usually means that the small business might get a favorable result, even when the facts and the contractual language favor the big business’s argument.
Delaware’s court system instead operates with deference to “the freedom to contract.” Essentially, the courts in Delaware assume that if two sophisticated businesses sit down and sign a contract, they know what they are doing. A business that claims it was too small to understand what it was doing will not find a receptive audience in Delaware.
Thus, if you negotiated a brilliant deal in Delaware, Delaware’s courts will enforce it. If you signed a terrible deal that destroys your profits and ruins your business, the court will enforce that one, too. Of course, exceptions can be made in cases where one party deceives another. Ultimately, this laissez-faire approach means that entire contract cases worth millions of dollars can be decided on a single sentence or punctuation mark. Rarely does this happen in other states.
Common Contract Disputes We Handle
Commercial litigation covers a massive range of business activities. However, most of the cases we see at SLG fall into a few specific categories.
Purchase and Sale Agreements
When companies are bought and sold, the closing date is rarely the end of the story. Buyers often dig into the newly acquired company and realize that the inventory is obsolete or that the financial statements are inaccurate. This triggers intense litigation over representations and warranties.
We also frequently litigate earn-out disputes. In these deals, the seller is supposed to receive an additional payout if the company meets certain revenue targets after the sale. The seller will argue that the buyer deliberately tanked the business to avoid paying the earn-out. The buyer will argue that the business simply underperformed. These cases require deep financial analysis and aggressive discovery tactics.
Loan Agreements and Financing
Lenders and borrowers clash constantly over debt covenants. A borrower might miss a specific financial ratio by a fraction of a percentage point, giving the bank an excuse to declare a technical default and call the entire loan. We handle the resulting fallout. Sometimes we help lenders enforce their rights and secure their collateral. Other times, we defend borrowers against banks that are using minor technicalities to seize control of a business.
Restrictive Covenants and Non-competes
You hire top talent and train them. You give them access to your proprietary data and your best clients. When they leave to join a competitor, you expect your non-compete and non-solicitation agreements to protect you.
Delaware courts are skeptical of restrictive covenants. They do not like agreements that prevent people from earning a living. If your non-compete is too broad, covers too large a geographic area, or lasts too long, a judge might throw the entire thing out. We know how the courts view these limits. We know how to enforce reasonable restrictions to stop former employees from stealing your market share.
Earnout Disputes; Development Milestones in biotechnology, pharmaceuticals, and technology development
Master Services Agreements (MSAs) and Vendor contracts
Supply chains are fragile. If a single supplier fails to deliver a specialized component, your entire operation can stall. Disputes over MSAs usually involve scope creep, missed deadlines, or arguments over who bears the risk of a market downturn. These fights often center on force majeure clauses, contract provisions that excuse delays if an unforeseeable disaster occurs.
Your Rights and Responsibilities in a Dispute
If someone breaches a contract with your company, you cannot just sit back, let the damages pile up, and plan to sue them for the total amount later. You have a legal responsibility to mitigate your losses.
If your supplier breaches, you must try to find a replacement supplier. If your tenant breaks their commercial lease, you must try to find a new tenant. If you fail to take reasonable steps to limit the financial bleeding, the court will reduce the amount of money you can recover.
Additionally, Delaware reads an “implied covenant of good faith and fair dealing” into every contract. This confuses many business owners. It does not mean you have to be nice to the other party. It does not mean you have to sacrifice your own profits to help them out. It simply means you cannot take deliberate, underhanded actions to destroy the specific value the other party expected to get from the contract.
Why You Need a Law Firm Experienced with Delaware Law
You cannot treat Delaware like a standard jurisdiction. The legal environment here is highly specialized, and the courts move aggressively.
Many high-stakes contract disputes are filed in the Delaware Court of Chancery. The Delaware Court of Chancery is unlike any other court in the United States. It is a court of equity, meaning there are no juries. Cases are heard by Chancellors and Vice Chancellors who are highly sophisticated corporate law experts.
If you just want money damages, your case will likely go to the Delaware Superior Court. For disputes over $1 million, you will find yourself in the Complex Commercial Litigation Division (CCLD).
In both of these venues, the judges expect attorneys to know the local rules and the dense history of Delaware case law. If your lawyer is primarily licensed from out of state and trying to learn Delaware procedure on the fly, you are at a severe disadvantage. At SLG, we operate in these courts every day. We know how the judges interpret corporate legalese and scrutinize agreements.
Frequently Asked Questions
Which court will hear my contract dispute?
It depends entirely on the remedy you are seeking. If you need an injunction (e.g., a court order forcing a seller to close a deal), your case goes to the Court of Chancery. The Chancery Court deals with equity and specific performance.
If you are seeking only monetary damages, your case will go to the Superior Court. If the damages exceed $1 million, it qualifies for the Superior Court’s Complex Commercial Litigation Division, which offers specialized judges and streamlined procedures.
How does Delaware interpret “vague” or “ambiguous” contract terms?
Delaware uses the “four corners” rule. The judge will first look at the text within the four corners of the contract. They will interpret the words using their plain, ordinary meaning. If the contract is clear on its face, the court will not consider extrinsic evidence when interpreting it.
However, if a term is genuinely ambiguous, the court might allow you to introduce outside evidence (also known as parole evidence). Common examples include: early drafts of the contract, email negotiations, past contracts between the same parties, and industry standards.
Can we expedite our dispute?
Yes. Delaware courts move fast when it comes to preliminary injunctions and temporary restraining orders. This is because you or your company could suffer “irreparable harm” if you had to wait weeks or months for a hearing.
However, you cannot fast-track a case just because you want your money sooner or for convenience. Those situations do not qualify as irreparable harm. Rather, courts look for situations where monetary damages cannot remedy the potential harm.
A common example of what does qualify as potential irreparable harm is when a former business partner decides to spread false information about your business. The resulting harm is often considered “irreparable” because the loss of goodwill cannot be easily measured.
Protect Your Business and Your Rights with the SLG Team
Business disputes do not resolve themselves. The longer you wait to address a broken contract, the more money you lose and the weaker your legal position becomes.
The party that takes action first gets to define the narrative and choose the venue. Whether you need to aggressively enforce a contract or defend your business against a baseless lawsuit, you need an experienced legal team that understands the realities of Delaware law.
Call SLG today at 347.378.6990 to schedule a confidential consultation with our commercial litigation team.
