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When Does Talking to Someone's Competitors Become a Breach of Contract?

When Does Talking to Someone's Competitors Become a Breach of Contract?

According to an article in the Bangor Daily News, a construction company is suing a wind farm developer for breach of contract. The contract at issue is a preconstruction, negotiation contract where each party agreed to negotiate exclusively and in good faith with one another on a final construction agreement. The construction company is accusing the wind farm developer of meeting with other construction companies and believes that these conversations break the agreement. The wind farm developers admit that they have met with other companies but they claim they never attempted to enter into a contract with the other businesses. The developers assert that they had conversations with members of the other construction companies so they could learn more about the standard price of services in the area. This case most likely will depend on what a judge thinks “negotiate” means and at what point can talking to competitors become negotiation.

Individual Words Matter

Before entering into any contract or agreement, you should think about your goals, what you need to do to complete the agreement and what you expect from the other party. If you enter an agreement misunderstanding your responsibilities or the responsibilities of others, you are still usually liable for the written terms. The are three common exceptions: (1) fraud by the other person, (2) when all parties involve disagree with the meaning of key terms, or (3) after an agreement by all parties to rewrite the terms of the contract.

But what happens when you disagree on a what a specific word (like “negotiate”) means? Unless you have evidence that terms have a specific meaning, such as explaining the term in the contract or all parties agreeing in court on a term’s meaning, the court will use the “normal” meaning of the term. What is considered normal varies both by industry and by locality. For example, if it were the standard in New Mexico for landowners to purchase and review any permits necessary for building, any mistakes due to incorrect permits would automatically fall on the landowner unless there was a contract explicitly stating that permit responsibility belonged to another person.

One way to protect yourself from such issues is to learn about what is considered normal in your industry in your business’s location. In the case of the wind farm, the best way to learn this would be by talking to other construction companies in the area. Asking about the standard rate for similar work and looking into other potential contract terms, helps it make a better deal for the business. Therefore, just talking to other business is not enough to breach the contract with the original construction company. However, knowing the specifics of the conversations will be important in deciding if there was a breach.

Using an attorney before completing a contract can help you figure which terms are standard and which may need to be explicitly defined within an agreement for clarity. This can reduce friction later and hopefully reduce the need for litigation later. If there is a disagreement, an attorney can let you know your options and help you protect yourself or your business. If you have any contract questions, consider calling our Long Island business lawyer for assistance.

See Related Blog Posts:
When is a Cancelled Contract a Breach of Contract
In New York Parties May be Liable for Breach of Contract When Relying on Oral Modifications

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