Claim: Overview, definition and example
What is a claim?
A claim is a formal request or demand made by one party against another to enforce a legal right or seek compensation for harm, loss, or damage. In contracts or legal disputes, a claim is the foundation of a party’s case—it explains why they believe they’re owed something and what they want as a remedy.
For example, if a supplier fails to deliver goods on time, a buyer might make a claim for compensation to cover the losses caused by the delay.
Why is a claim important?
A claim is important because it’s how legal disputes are raised and resolved. It ensures that the injured party has a way to seek justice or compensation when their rights are violated. For businesses, clearly stating claims in contracts helps set expectations for resolving issues, reducing confusion and disputes.
Claims also provide a structured way to address breaches or damages without escalating straight to lawsuits, as many contracts include processes for resolving claims through negotiation or arbitration first.
Understanding a claim through an example
Imagine a construction company hires a subcontractor to build a new office complex. If the subcontractor doesn’t complete the project on time, the construction company could make a claim against them for the costs incurred due to the delay, such as renting additional equipment or paying penalties to their client.
In another example, a software company licenses its program to a customer. If the software doesn’t work as promised, the customer might make a claim under the contract’s warranty clause, requesting either a refund or fixes to the product.
An example of a claim clause
Here’s how a claim clause might appear in a contract:
“Any claim arising under this Agreement must be submitted in writing within 30 days of the event giving rise to the claim. The Parties agree to use reasonable efforts to resolve claims through negotiation before pursuing legal or arbitration proceedings.”
Conclusion
A claim is a formal way of seeking compensation or enforcing a right when something goes wrong in a business or legal relationship. It provides a clear path for addressing breaches or disputes and is an essential tool for protecting rights and resolving conflicts.
By understanding how claims work and including clear processes for handling them in contracts, businesses can minimize misunderstandings, manage disputes effectively, and maintain professional relationships. Claims ensure accountability and fairness in agreements.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.