A Commercial Dispute Has Arisen – First Steps To Take

Unfortunately, disputes are an inevitability of business, no matter what sector you operate in, be it engineering, manufacturing, automotive or retail.

There are a number of different instances in which disputes can arise but one of the most common is with a supplier. This issue is common in the manufacturing, engineering and construction sectors, to name a few, and will usually be due to late delivery, defects in goods upon delivery and/or non-payment of invoices.

First steps to take in a business dispute

Whether your business has an issue with another party or your business has been notified by another party of an issue it has with you, we have set out a number of initial steps below to take to try and ensure the dispute does not escalate and is resolved as soon as possible.

If it becomes clear that the dispute cannot be resolved at this stage, these steps will also help you gain an overview of your business’ strengths and weaknesses, if the dispute ends up going to Court.

  1. Review the Contract

Whilst this might sound obvious, you must review what was agreed, and on whose terms, at the outset of any dispute. If there is no written contract, you must try and establish, if there is an oral contract, what was said by whom, where and when? Do you have any contemporaneous notes of these discussions? If not, put down in writing what you remember as soon as possible.

A contract may also be formed by the conduct of the parties, therefore, it is important to review the business’ behaviour and that of the other party.

  1. Breach/Failure

If it is your business that has the potential claim, consider how the other party’s failure to fulfil the contract has affected your business and what loss has been suffered. Has your business contributed in any way to the failure of the other party to fulfil its obligations under the contract? Does the other party have a possible claim against your business?

  1. Limitation

Check the time limits under the contract for notifying the other party of a dispute. For example, in supply contracts there are usually terms which state that you must notify the supplier of any defect/loss within x number of days. While the terms and conditions may set time limits for bringing claims, these should be viewed in conjunction with the Unfair Contract Terms Act 1977.

There are also statutory time limits for bringing breach of contract claims, normally 6 years from when the breach has occurred.

  1. Evidence

It is vital that you preserve evidence relating to the dispute. You might think the dispute will be resolved before it gets to Court proceedings but don’t rely on that. Save all emails, documents, materials, etc., relating to the point in the dispute and if there are key employees it may be useful to get a note of their dealings with the other party.

The issue of litigation and legal privilege is also relevant and should be given considered thought.

  1. Resolution

Sometimes an amicable solution can be reached between the parties directly if there is a willingness to compromise and continue a working relationship from the outset. Ensure the negotiations are carried out on a without prejudice basis, so that if a resolution is not reached, any compromises offered within the negotiations cannot be referred to at a later stage.

In some instances, it may be the case that there is a clear “right” and “wrong” party, in which case, if the “wrong” party isn’t willing to play ball, it will force your hand to move on to the next step.

If the above steps don’t help with your dispute, then you may need to escalate matters. We will soon be releasing another article on how to do this.

How Nelsons Can Help

Lynsey Burke is an Associate in our Dispute Resolution team specialising in a wide range of commercial disputes.

If you would like advice in relation to the subjects discussed above, please contact Lynsey or another member of the team in DerbyLeicester or Nottingham on 0800 024 1976 or via our online form.