Last updated: October 2026
The first question in most business disputes is not who is right but how long you have. In California a written contract claim must generally be brought within four years, an oral one within two, and the period runs from the breach rather than from the day you decided it was serious. The second question is what the contract says about how disputes are resolved, because that usually decides where you end up. Bay Legal, P.C. advises California businesses on both sides of commercial disputes, from demand letter through trial or arbitration.
Definition: A business dispute is a commercial disagreement between businesses, or between a business and its owners, employees, or counterparties, over rights and obligations.
How long do you have to bring a claim?
This is the part to establish before anything else, because a deadline missed is a claim lost regardless of merit.
| Claim | Period | Authority |
|---|---|---|
| Breach of a written contract | 4 years | Code Civ. Proc. § 337 |
| Breach of an oral contract | 2 years | Code Civ. Proc. § 339 |
| Fraud or mistake | 3 years from discovery | Code Civ. Proc. § 338(d) |
| Injury to personal property or trade secrets misappropriation | 3 years | Code Civ. Proc. § 338 |
| Claims with no other stated period | 4 years | Code Civ. Proc. § 343 |
Full text: § 337 · § 338 · § 339 · § 343.
Two things extend or shorten these in practice. A contract can specify a shorter period than the statute allows, within limits, so the agreement is worth reading before assuming four years. And the discovery rule can delay the start of the period for fraud and for some other claims, though relying on it is a poor substitute for acting promptly.
What disputes come up most often?
- Breach of contract. The largest category by volume — unpaid invoices, failure to deliver, defective performance, and disputes over what the contract actually required.
- Owner and partner disputes. Deadlock, exclusion from management, breach of fiduciary duty, and disagreements over distributions. These have their own page because they turn on the governing agreement rather than on general contract law.
- Business torts. Intentional interference with contract or prospective economic advantage, fraud in the inducement, and unfair competition under Business and Professions Code section 17200.
- Trade secrets. Misappropriation under the Uniform Trade Secrets Act at Civil Code section 3426 and following, often arising when an employee leaves for a competitor.
- Employment claims. Wage and hour, classification, and separation disputes, which follow their own statutory framework and deadlines.
Should you mediate, arbitrate, or sue?
Often the contract has already decided. Where it has not, the choice turns on speed, cost, privacy, and whether you need a remedy only a court can give.
| Negotiation and demand | Mediation | Arbitration | Litigation | |
|---|---|---|---|---|
| Who decides | The parties | Nobody — a neutral facilitates | An arbitrator | A judge or jury |
| Binding | Only if settled | No | Yes, with very limited appeal | Yes, with full appeal rights |
| Typical cost | Lowest | Low | Moderate to high — arbitrator fees are real | Highest |
| Privacy | Private | Private | Private | Public record |
| When it fits | Almost always worth trying first | Often required by the contract before filing | Where the contract mandates it | Injunctive relief, multiple parties, or no arbitration clause |
A well-documented demand letter resolves a substantial share of commercial disputes at a fraction of the cost of proceedings, and it creates a record if it does not. Before filing, check three things: whether the contract requires mediation first, whether it contains a fee-shifting clause that changes the economics entirely, and whether an arbitration clause applies.
What can you actually recover?
Compensatory damages are the ordinary remedy — the loss caused by the breach, which in contract usually means being put in the position you would have occupied had the contract been performed. Consequential damages may be available where the loss was foreseeable, and contracts frequently exclude them, which is worth checking before building a claim around them.
Beyond damages, courts can order specific performance where money is inadequate, grant injunctive relief to stop ongoing conduct, and issue declaratory relief resolving what a contract means before either side acts on it. Punitive damages are not available for breach of contract alone but may be where the conduct amounts to fraud or another tort.
Attorney fees follow the contract. There is no general right to recover them in California, so a fee-shifting clause frequently matters more to the economics of a dispute than the size of the claim.
Where are business disputes heard?
In the Superior Court of the county where the defendant resides or does business, or where the contract was to be performed, unless an arbitration clause or a forum selection provision says otherwise. In practice that means Santa Clara, San Mateo, Alameda, San Francisco, or Contra Costa in the north, and Los Angeles, Orange, or Ventura in the south. Several of these counties operate complex litigation programmes for larger commercial cases. The California Courts publish local rules, which differ by county and matter more than most litigants expect.
Smaller claims have a faster route. California’s small claims courts handle limited-value disputes without lawyers, which for a modest unpaid invoice is often the proportionate answer — and worth knowing before spending more on advice than the claim is worth.
Who handles business disputes at Bay Legal?
Lead litigation attorney Evan Livingstone heads the firm’s litigation group. Managing attorney Jayson R. Elliott handles business and contract matters and advises on disputes before they proceed. Where a dispute concerns construction or real property, it is handled by the attorneys who practise in those areas rather than as general commercial litigation.
Bay Legal, P.C. serves businesses statewide from offices in Palo Alto and Los Angeles, including companies across San Francisco and the wider Bay Area.
Frequently Asked Questions
How long do I have to sue for breach of contract in California?
Four years for a written contract under Code of Civil Procedure section 337, and two years for an oral one under section 339. The period generally runs from the breach rather than from when you noticed it. A contract can specify a shorter period within limits, so read the agreement before assuming you have four years.
Do I have to try mediation before filing?
Often yes, because many California commercial contracts require it. Filing without satisfying a mandatory mediation step can bring a stay or a costs consequence. Check the dispute resolution clause before doing anything else — it frequently also contains an arbitration provision that decides the forum entirely.
Can I recover my legal fees if I win?
Only if a contract or statute provides for it. There is no general right to attorney fees in California. A fee-shifting clause often matters more to the economics of a dispute than the size of the claim itself, because it changes what each side risks by continuing.
Is arbitration better than going to court?
It depends on priorities. Arbitration is generally faster and private but offers very limited appeal and real arbitrator fees. Litigation is slower and public but preserves appellate rights and handles disputes involving several parties better. If your contract mandates arbitration, that clause is generally enforceable.
What is a demand letter and is it worth sending?
A formal written statement of the claim, the basis for it, and what you want, usually with a deadline. A substantial share of commercial disputes resolve at that stage, at a fraction of the cost of proceedings, and it creates a record of your position if the matter does proceed.
My dispute is with my business partner. Is that the same thing?
Not quite. Owner and partner disputes turn on the operating agreement, shareholder agreement, or partnership agreement and on the fiduciary duties owners owe each other, rather than on general contract law. They follow a different analysis and have their own statutory framework.
Related Questions
What is unfair competition under section 17200?
A broad California claim covering any unlawful, unfair, or fraudulent business act. It is frequently pleaded alongside contract claims because its reach is wide, though the remedies available are more limited than in an ordinary damages claim.
Can I sue in small claims court instead?
For limited-value disputes, often yes, and it is faster and cheaper. Businesses face lower limits than individuals and lawyers cannot appear, so it suits straightforward unpaid invoices rather than disputes about what a contract meant.
What is a forum selection clause?
A provision fixing where disputes must be brought, sometimes in another state. California courts generally enforce them, so a clause agreed years ago can determine that you litigate somewhere inconvenient.
Should I stop performing if the other side breaches?
Not without advice. Whether a breach is material enough to excuse your own performance is a legal judgment, and stopping over a non-material breach turns you into the breaching party.
Talk to a California business dispute attorney
The limitation period is running from the breach, not from the day you decide to act. To discuss a commercial dispute with a Bay Legal attorney, call the office nearest you or email intake.
Bay Legal, P.C. — serving California statewide
Northern California office
667 Lytton Ave Ste 3, Palo Alto, CA 94301
(650) 668-8000
Southern California office
3211 Cahuenga Blvd W Ste 212, Los Angeles, CA 90068
(213) 668-8000
Intake: intake@baylegal.com
Fax: (650) 963-0041
Website: https://baylegal.com
This page is general information about California law and does not constitute legal advice or create an attorney-client relationship. For advice on your specific situation, contact a licensed California attorney.