How to Miminise the Risk of Commercial Disputes

16 Nov

As litigators, we know better than most how stressful and time-consuming disputes can be. We also know that many of the disputes that reach us could have easily been avoided or mitigated. Businesses operate in many different ways but there are certain common factors that apply across the board. Here are some tips to help encourage your clients to engage proactively with you to minimise the risk of expensive litigation.

1. Get The Terms Right

The vast majority of disputes that we see are contract-related and very often the root cause is a failure by clients to obtain proactive advice on the terms before entering into an agreement. This can lead to uncertainty over terms or, worse still, signing up to unhelpful provisions that are difficult to unpick at a later time. Common issues are a failure to document core obligations properly, being unable to terminate effectively and agreeing to stringent limitation of liability clauses that restrict the losses a client can recover.

The number 1 ‘lesson learned’ that we discuss with our clients is the value of engaging with their commercial advisors before entering into contractual arrangements and, where using standard terms, to ensure these are reviewed and updated regularly. You are obviously best-placed to ensure contracts cover the core rights and obligations of the parties and contain (or avoid!) ancillary clauses covering limitations/exclusions of liability, rights of termination and dispute resolution procedures.

2. Ensure The Terms Are Incorporated

Businesses need to ensure that appropriate internal systems are in place within businesses to incorporate terms effectively. In standard terms scenarios, the focus will be on ensuring terms are brought to the attention of the counterparty at the right time and avoid losing a ‘battle of the forms’. When dealing with bespoke agreements, systems will focus on making sure escalation/authority lines are used and that appropriate input is sought from commercial advisors.

Sometimes systems can be automated (and even then, input from lawyers can be invaluable) but often the real value is assisting with internal training, given that numerous individuals within an organisation will commonly have the power to negotiate and enter into contracts, whether on the sales side or procurement. Ensuring those individuals are live to common legal issues and know when to spot a ‘red flag’ situation, can significantly improve the contractual resilience of a business.

3. Retain Proper Records

Contemporaneous evidence is very often key to resolving disputes favourably and so it’s important to keep proper records that are appropriate to the size and level of risk in the contract.

In simple, volume-based contracts, this may just be an electronic record of an order and the inclusion of terms in an email or as part of the online sales process. Often standard software/databases will have this functionality built in or it can otherwise be coded in an inexpensive way. The key is to be able to store and access those records easily if so required.

In more complex negotiated agreements, as well as safeguarding the final version, it is advisable for clients to retain evidence of any the initial negotiations including any draft agreements. Sometimes final versions can contain errors, or matters of commercial importance can be inadvertently missed out altogether. If issues arise, the trail of correspondence can help deal with these issues and avoid lengthy battles caused by people having very different recollections of what was discussed.

4. Have Appropriate Mechanisms in Place to Address Problems

A lot of disputes escalate because communication breaks down. Businesses with an effective approach to customer service and, where appropriate, complaints procedure will give themselves the best chance to de-escalate a problem and find a solution. Time is certainly of the essence. We often hear parties - both our clients and opponents – saying that a proposed solution would have been acceptable… if only it had been offered at the outset. It is particularly important to try to intervene with a solution before the contract is terminated which can be the point of no return. Parties will often stomach delays or defects if they know the other party is working with them to resolve the situation. Again, training is often key to ensure employees can either deal with complaints themselves or escalate appropriately.

It is also critical that senior managers know that their professional advisors are on hand to help with the trickier scenarios and that they should not delay in contacting you. In so many cases, early strategic advice will save clients time and money or avoid an expensive mistake, such as handling termination in the wrong way. In turn, we are at the end of the line to talk through a particular problem.

How we can help

If an issue does arise, we are always available for an initial, no-obligation chat with our professional partners. Aside from contract disputes, we can help with a range of issues from shareholder & partnership disputes to business & brand protection. We are proud that we are able to resolve a good number of problems with some early, free, pragmatic advice. Where our involvement is needed, we can step in advise clients direct or assist you in the background, depending on what is more appropriate. We offer transparent fee structures and a high level of service from our experienced team.

We are also on hand to give a litigator’s view on drafting issues such as dispute resolution clauses, termination provisions and limitations of liability. Each contract and commercial scenario is different and we can discuss how those provisions might play out if they were ever tested.

If you would like to discuss a particular issue, or find out more about how we can help, we’re available on the contact details below.