Experiencing a commercial dispute has to be at the top of business owners’ ‘most dreaded events’ list.
Yet, with a report by FSB on commercial disputes showing that 70% of members went through at least one incident between 2010 and 2015, it’s likely that, at some point, you will find yourself embroiled in some sort of business disagreement.
I see many clients terrified that they’ll lose their businesses because of a dispute with a client or business partner, but, with some good advice and a clear head, there’s no reason why that should be the case.
The main causes of commercial disputes tend to be around contract terms and conditions and in-house conflict, both of which can cause a wealth of problems.
There may be issues, for example, regarding the meaning of a contract’s technical terms, or a disagreement between business partners when one person wants out. It could even be a case of another business not having honoured their contractual obligations. Whatever the reason, if a dispute is on the cards then swift action is needed – especially if the contract involves an
EU national or business, as we’re not yet sure what effect leaving the EU will have on these.
Of course, there are pre-emptive steps you can take to minimise the chance of a commercial dispute arising in the first place.
These include, first and foremost, having clear, written contracts in place with anyone you do business with. I’m regularly asked for advice by people who have fallen into business deals that have never been formalised by way of an official document.
Also, at the first hint of a problem, suggest to the other party that you both sit down and try and find an amicable solution to prevent it from escalating.
However, if it soon becomes apparent that the issue will not be easily resolved, or if you find yourself at the other end of the legal claim, then it is vital that you take it seriously. Legal letters should be responded to quickly, in writing.
Look over the facts of the case, review what was agreed, and consider carefully where you or the other party may have failed to fulfil commitments. Then calculate how much that failure may equate to both in monetary terms and time.
If you are the party taking legal action, you need to consider your options carefully rather than heading straight for the courts. Bringing a case before a judge is a stressful process, during which time you’ll need to continue with the day-to-day running of your business while simultaneously dealing with the emotions and administration that a court case will naturally bring, never mind the cost.
Even if you’re successful, that’s not the end of the story - as you may have to enforce a judgment by asking the court to collect payment – at an additional cost to yourself - from the other party.
In today’s legal world, compliance with the various protocols is key, as is trying from an early stage to seek a resolution via negotiation or some other form of ADR.
Mediation is key. I trained as a mediator many moons ago when it seemed alien to all, however, today it is and has to be the way to look to settle disputes. With over 12,000 commercial mediations (excluding small claims mediations) performed between the summers of 2017 and 2018, and settlement rates hitting an overall high of 89%, I would encourage it in all circumstances.
Very few people would willingly walk into a commercial dispute. But if you happen to find yourself embroiled in one, don’t despair. With a professional, measured approach and a good dose of common sense, there’s no reason why you and your business can’t get through it – and live to tell the tale.
Paul Barnes is Head of Dispute Resolution at Kirwans law firm