Commercial Litigation and Arbitration

Commercial litigation is business litigation focused specifically on transactions: the sale of goods, equipment leases, financing agreements, and the day-to-day contracts that keep a supply chain moving. In California, most of these transactions are governed by the Uniform Commercial Code as adopted in the California Commercial Code, which sets different rules than the general contract law that applies to, say, a services agreement or a real estate lease.

A second thing separates commercial disputes from other business litigation: many commercial contracts include an arbitration clause, which routes a dispute out of court entirely and into a private forum. TencerSherman LLP handles both sides of this: litigating commercial disputes in San Diego County Superior Court and the U.S. District Court for the Southern District of California, and representing clients in arbitration before AAA or JAMS when a contract calls for it.

When the UCC governs your dispute

The California Commercial Code applies to transactions in goods, meaning tangible, movable property. A dispute over a shipment of defective inventory, a delayed equipment delivery, or a supplier substituting materials without authorization is a UCC matter. A dispute over a consulting agreement or a commercial lease is not; that runs under general California contract law instead, which is covered on the contract disputes page.

The distinction matters because the UCC changes the default rules. A buyer who receives nonconforming goods has the right under the UCC to reject the entire shipment, accept it, or accept part and reject the rest, options that don't exist under ordinary contract law. The UCC also sets its own statute of limitations for breach of a sales contract: four years from the date of the breach under California Commercial Code section 2725, regardless of whether the underlying agreement was written or oral.

Common commercial disputes

• Nonconforming goods. A vendor delivers a defective, incomplete, or substituted product.
• Late or non-delivery. A supplier misses a delivery deadline that has downstream effects on the buyer's own commitments.
• Payment disputes. A buyer withholds payment, disputes invoiced amounts, or claims a right of setoff.
• Financing and lending disputes. Disagreements over loan terms, defaults, or the priority of competing claims to collateral.
• Equipment lease disputes. Disputes over maintenance obligations, early termination, or end-of-lease condition requirements.

How arbitration works, and why your contract might require it

Many commercial contracts include a clause requiring disputes to go to arbitration instead of court. If that clause is enforceable, a court presented with a lawsuit covered by the clause will generally compel arbitration and stay the litigation, under either the Federal Arbitration Act or California's own arbitration statutes in the Code of Civil Procedure, whichever applies to the contract.

Arbitration differs from litigation in a few concrete ways that matter to a business deciding how to respond to a dispute:

Private forum, private arbitrator. Instead of a judge, the parties typically select an arbitrator from a roster, often with relevant industry experience, through a provider like the American Arbitration Association (AAA) or JAMS.

Limited discovery. Arbitration discovery is usually narrower than what's available in court, which can cut both ways: lower cost and faster resolution, but less ability to dig into the other side's records if the dispute turns on facts they control.

Narrow appeal rights. An arbitration award is very difficult to overturn. Courts will vacate an award only in limited circumstances, such as arbitrator misconduct or fraud, not because one side thinks the arbitrator got the law wrong.

Confidentiality. Arbitration proceedings and awards are generally private, unlike court filings, which is one reason some businesses prefer it for disputes involving sensitive commercial information.

Whether arbitration is actually the better forum for a given dispute depends on the contract, the amount at stake, and what kind of discovery the case is likely to need. TencerSherman evaluates that as part of case strategy rather than treating an arbitration clause as automatically final; disputes over whether a clause even applies to the claim at issue are themselves litigated in court before arbitration begins.

Frequently asked questions