Commercial disputes can be painfully expensive, stressful and hugely damaging for any business. Settling a commercial dispute at an early stage can save a business a considerable amount of money, time and energy. Avoiding a commercial dispute in the first place is even more preferable and the tips outlined below go some way to advising businesses on how they can minimise and manage such issues.
1. Watertight Terms and Conditions
Carefully and meticulously drafted terms and conditions based on clarity can be integral to avoiding disputes by clearly outlining issues such as payment provisions and situations in relation to liability. It is essential that such terms and conditions are effectively incorporated into any contracts that the business enters into. The terms and conditions will act as a legal framework for any such contractual relationships and will seek to protect the business in the event of a dispute arising. Farleys regularly draft such terms and conditions for businesses and it may be worth considering speaking to us today to ascertain if your business’ terms and conditions are up to date and effective in the event of such a dispute.
2. Carry out Research and Due Diligence
When contracting with a new business or individual it is imperative that sufficient background research and due diligence is carried out to verify the correct identity and credit history of the party in question. A variety of checks can be performed nowadays with the use of sites such as Companies House Beta, Land Registry and even simple Google searches. Obtaining some form of payment on an up-front basis by way of a payment on account or by having a default payment clause can also assist. It may also be worth exploring whether any Directors of a contracting company would be worth signing a Personal Guarantee as a back-up option should the company itself fail to make payment.
3. Gather together all relevant supporting evidence and negotiate at an early stage
It is highly important that when it appears that a dispute may develop, all documentary evidence to include; emails, contractual documentation and invoices are collated at an early stage in order to put forward as strong a legal case as possible. It is also advisable to negotiate with the contracting party as early as ever possible in order to avoid unnecessary legal costs if these can be avoided. Parties may often consider the use of a mediator or a face to face to meeting in the hope of settling the issue at hand. A payment plan or deferred payment strategy may be an amicable solution in the circumstances. It can often be useful to create a chronological account of the facts and occurrences to date which will also assist a solicitor in drafting a formal letter of claim further down the line if such an approach is deemed necessary.
4. Distinguish the “Can’t Pay” from the “Won’t Pay”
A clear distinction is required between a debtor who is refusing to pay and one who simply cannot pay due to cash-flow or insolvency issues. A “won’t pay” debtor is arguably a more attractive defendant on the basis that it has the funds to be worth pursuing. The Pre-Action letter writing approach is likely to be used by a solicitor as a precursor to any court proceedings which may well ultimately be deemed essential. It is futile spending unnecessary time and effort on a debtor who cannot pay as we are all familiar with the saying “you cannot get blood out of a stone”. The insolvency route may need to be explored in relation to the “can’t pay” debtors. A competent solicitor will be well-placed to advise you on how to liaise with the requisite Insolvency Practitioner (if one has been appointed) in order to file a proof of debt form and put forward any further interests as a creditor of the insolvent company.
5. Consult a Solicitor at the Outset
It is important to speak to a solicitor at the earliest possible opportunity if it becomes apparent that a dispute is developing. A solicitor will be well placed to advise upon both the legal arguments and merits at play in the matter and will also gauge any commercial reality and minimise any inherent risk to the business in question. It is also essential that the correct approach is taken at the outset whether this be the court proceedings route or the insolvency approach in order to avoid any unnecessary costs implications further down the line.
Here at Farleys we have a specialist team of lawyers who handle a variety of commercial disputes on a daily basis. If you have been affected by any of the above issues then click here to contact one of our specialist Commercial Litigation Solicitors.