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How best to protect your business against disputes...
U
ncertain economic conditions often generate some form of dispute. Business projections
and expectations are scuppered. Financing is withdrawn or is not
granted. The economic principles of contracts crumple. Business partners, suppliers and customers fail to perform or become insolvent. In a business climate which still lacks
new opportunities, there is a tendency to litigate over yesterday’s problem if tomorrow’s deal is not there to be done. In turn those who are sued resist – defending and delaying with equal vigour in order to put off the inevitable day of reckoning. Is litigation the best way of resolving
disputes? Can disputes be avoided in the first place? What is the best way of protecting your business in difficult trading conditions? The first rule is that advance planning
can avoid disputes or enable them to be handled more effectively if they do arise. This involves a proper risk
assessment for the business and an analysis of your key contracts and relationships. Your contracts should identify a process for settling a dispute. Well drafted terms and conditions
of business can be beneficial in avoiding disputes (or increasing the chances of winning disputes if they arise). For example, if you are the seller of goods or services, payment terms should be clear and, where possible, exclude rights of the other party to withhold payment (eg on the ground of set-off).
Second, make sure you are clear
on the area of disagreement. Take advice early. Self-help has its limits. It is invaluable to get an early and objective appraisal of your position, so as to enhance your prospects of recovery rather than waiting until it is too late for anything to be done. Some rights can be lost if you delay exercising them so you need to know which they are and how to preserve them. Third, it well be may be commercially
sensible to pursue a claim for a deal that has gone wrong. However, pick your battles and prepare your ground and tactics carefully. Analyse the issues at stake (eg weighing up the value of the dispute against the risk of losing or the cost of winning – will you lose a customer or a valuable supplier?) Be clear on what you are seeking to
achieve. This will influence the method of resolution. Court action may not be necessary. The dispute may be better suited to negotiation or more structured alternatives such as mediation. Increasing numbers of disputes are resolved at a very early stage, at considerably less legal and management cost and without the delay involved in court action. A pro-active approach to resolution is invariably better than allowing a dispute to become deadlocked and entrenched. Helen Tudball is an Associate with HardingEvans Solicitors and an expert in commercial dispute resolution and insolvency. Contact Helen on 01633 760678 or email:
tudballh@hevans.com.
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