In a perfect world all professional relationships would work out exactly as planned, but sadly we live in the real world and disagreements are never far away. Every year thousands of business disputes happen as customers, manufacturers, suppliers and even local authorities clash over contracts, agreements and payments.
When a dispute occurs, you need to apply rational and objective analysis to make the best decision for your business. This means compiling evidence and gaining advice on the likely strengths and weaknesses of your case, as well as the resources you wish to use to get a favourable result.
How to resolve a business dispute.
Resolving a dispute in the correct way will save your business money, and you, a great deal of stress. With this goal in mind we wanted to run down the five key steps in getting a favourable resolution to your business dispute.
1. Review the contract and your position.
To start, you need to assess whether you have a strong case or whether you are likely to be at risk of losing in the long run. To do this, you need to examine exactly what has happened as well as reviewing the relevant documents between the other party and yourself.
Do any legal agreements or contracts exist between you? If so then find the relevant clauses that apply to the issue you are in dispute over to confirm there has been a breach.
If you don't have a formal contract or agreement in place, do you have any other written correspondence or evidence of the business relationship? Have you exchanged emails or text messages that show what was required or expected from the parties involved?
It could then be that the law suggests there is an implied contract in place from historical actions or transactions.
2. What outcome do you want?
As soon as you know the strength of your case, you should objectively consider the result that you want to achieve or are willing to accept as a compromise.
Business disputes usually involve a breach of contract and the party who suffers a breach is entitled to be placed in the same financial position as if the contract had been fully complied with. Therefore while you may have the right to be compensated for the full amount, you may be willing to accept a lesser figure or other compromise to achieve a resolution.
For example, if a customer cancels a contract without providing the required notice as they are selling their business. You may be open to allowing them to end the contract early on the condition that the new owner agrees to pick up your services or enters a similar contract with you.
You may also want to consider ongoing relations as part of what outcome you are seeking. Some business owners want to set an example to prevent other customers or suppliers breaking contracts and repeating the situation. Even though taking an uncompromising approach is not advised and may be expensive in time and money.
On the flip side, you may have had a good relationship with the other party and so be open to find a more amicable solution and keep working with them.
You should always assess the dispute with your 'commercial hat on' and decide what course is best for your ongoing business whilst minimising the associated risks and costs.
3. Assess the opposition.
Often businesses neglect to think of the other side in a dispute, but it can be valuable knowing their position and what they want or don't want to happen. For example:
4. Consider the cost of a contract dispute.
With all the above in mind, you need to weigh up your options and how much each course of action will cost in time and money.
Your case prospects will factor into this, as with a strong case going all the way to court may be the best option. Additional costs like the court issue fee, hearing fee etc. can be recovered as part of your claim when you win.
While on weaker cases or those that are very complex, making a compromised offer for a quick settlement may be more efficient.
Legal representation will also incur a cost, so it's important to discuss fees with your solicitor when considering legal action. Having all the potential legal and court costs in mind will allow you to make an informed decision when looking at what you may recover through litigation or are willing to offer/accept as a compromise.
5. Have a business dispute strategy.
Once you have combined your own research with legal advice, you can plan an approach that gives your business the best chance of achieving its desired outcome.
You may then decide that an informal chat with the other party outlining your findings may bring about an agreement. Alternatively you may wish to instruct a solicitor to write a Letter Before Action, outlining your claim and giving notice to your opponent that if a settlement isn't made in a defined timeframe court proceedings will be commenced against them.
When it comes to disputes, a court hearing is often a last resort as there are many other solutions that are generally found before it gets to this point. Even if court proceedings are issued, settlements are usually achieved before an actual day in court is reached.
While you should always have a strategy and budget in mind, don't rule out altering this plan as the situation develops. Mediation, negotiation or compromise should only ever be ruled out after you have considered them thoroughly.
Each dispute is unique and the optimum way to resolve them is via careful and early analysis of the situation and prospects. This is why there is no substitute to taking legal advice on your dispute as early as possible.
In business many people struggle when asked to review a contract or an agreement that has been presented to them. After all when finalising a deal or new business relationship, you are more likely to be focusing on the logistics and implementation of the actual deal than the wording of the contract.
However quickly glancing at a contract and just signing it to 'get the ball rolling' should be done at your peril.
Getting professional legal help with the document is your safest option, but if you're in the early stages of going through an agreement we wanted to share a few contract review tips on how to read a contract like a lawyer.
Contract review process.
A contract is simply a written agreement between two or more parties to do (or not to do) a particular action. When correctly drafted and signed, a contract becomes a legally binding agreement that both parties must comply with.
The most important aspect of any contract is to precisely articulate the arrangement that has been agreed between the parties, ensuring it is in line with current law and legislation.
The remainder of the contract should then document how any foreseeable scenarios will be dealt with for the duration of the agreement. Such as implementation, timings, payment, failures, amendments, disputes and termination.
With this in mind it's time to begin the process of a detailed read through to understand the key clauses and look for anything that’s ambiguous or absent.
Definitions in contracts.
The major terminology or wording used should be specifically defined, either in the body of the contract or in the case of a lengthy document in a dedicated 'Definitions' section. Disputes often arise if a term isn't clearly documented and is just left for each party to interpret. For example, common terms such as:
Identifying parties to a contract.
The individuals or businesses that are entering into the agreement should be clearly defined. If only the name of a business or individual is documented, it may be considered ambiguous should you ever need to enforce the contract.
In the case of a limited company make sure their registered office and company number is recorded which precisely identifies them. With individuals detail their trading name (if a sole trader), address and date of birth.
Duration, termination and renewal.
The duration that an agreement covers or remains in force is an important clause to consider. While the parties may not want to be bound to an arrangement forever, they also may not want to be entering into a new contract every few months. Therefore, each party needs to consider what is a reasonable period for the contract to cover and how any extension or termination is dealt with.
Indemnity clause and limitation of liability.
Indemnity is when a party agrees to protect and compensate another party from losses that may occur in the event of a specific breach or negligence. For example, a retailer may seek indemnity from a manufacturer in the event the products supplied are defective and a claim is made against them by a consumer.
A limitation of liability clause is used to restrict the amount a party pays in the event another party suffers a loss due to the contract. Without this term, a party may be liable for an unlimited amount of damages and financial compensation.
Both these clauses require careful and clear drafting if they are to successfully manage the risks posed by a contract whilst not impacting a party's statutory rights.
Governing law, jurisdiction and dispute resolution clauses.
There's little point in carefully drafting a legal document without specifying the law and jurisdiction under which it falls.
You may think this is only important when dealing with international agreements, however this isn't the case. The UK alone has three legal jurisdictions (England and Wales, Scotland and Northern Ireland) each of which has their own distinct legislation.
A contract should clearly define which legal system it operates under and the court any dispute will be handled in. On the subject of disputes, court action should always be a last resort, so it is also worthwhile to consider dispute resolution options as part of the agreement.
A simple alternative dispute resolution clause that requires all parties must first undertake negotiation or mediation in an attempt to resolve an issue can save both time and money should a disagreement ever arise.
Legal document checking.
If you are presented with a contract prepared by another party or their solicitors, there really is no substitute for getting your own independent legal advice on its content.
Likewise if you have been using the same contract or terms of business for several years, how confident are you that it still stands up to the latest legislation?
Instructing a solicitor to review and advise on the contract should be seriously considered. Many will be able to offer a fixed fee service and by acting with your best interests in mind, tailor a review to focus on the risks you may be exposed to.
If you've a consumer or business issue that you've been unable to resolve with informal discussions or negotiation, the next step is usually civil legal action.
As the Claimant in a claim it will cost you time and money to issue court proceedings and there are three 'tracks' which a claim can be allocated to depending on the complexity and value of the matter.
The majority of disputes and subsequent claims fall into the Small Claims Track which is designed for use without the need of a solicitor. However, in reality the process can be complex with various procedures, dates and correspondence all to be complied with.
But before starting down the path of issuing a claim, you need to have an understanding of how much it may cost to take someone to the small claims court.
Small Claims Court Fees.
Being the Claimant, you will need to the pay fees to the County Court to start and run the claim. These Court Fees are payable at two key stages of the claim and are required in advance, so ensure you have these available prior to starting your claim.
Should your claim be successful, and a judgment be returned in your favour, all the Court Fees you have paid will be added to the amount the Defendant must pay you.
Small claim court fees and limits and can vary across the UK as well as with different types of claims (personal injury, housing disrepair etc). In this guide we'll be referring to the process in England and Wales for Money Claims.
While there is technically no minimum amount for a money claim, the lowest issue fee (the fee you pay to start the process) is £35.00. Therefore if the amount you are looking to recover is very small, you should consider if issuing a claim will be cost effective for you.
Small Claims Court Issue Fee.
The Issue Fee is required when you first submit your Claim Form to the court and start your claim.
A claim can be submitted with a paper claim form or via the Internet using the Money Claim Online service. Previously there was an issue fee discount for using the online service, however this discount was withdrawn in May 2021.
Still the benefit of submitting the claim online is that you won't have to print and post the documents, so your claim will be issued faster. You will however need to register for an online account and you cannot use this service if you don't know the exact amount you are claiming for or the defendants are outside England or Wales.
Regardless of which method you use to submit your claim, the Issue Fee will be based on the amount you are claiming or the amount that you are estimating the claim is worth.
Correct as at 4 June 2021, but please see EX50 for full details and latest fees.
If using the online service this fee is payable by credit or debit card prior to submission. If you use a paper claim form, you will need to include a cheque or postal order for the correct fee.
If your claim isn't disputed or defended, then judgment will be awarded in your favour and no other court fees will be payable (known as judgment by default).
Small Claims Hearing Fee.
If the claim is defended, then the case will need to proceed to a small claim hearing unless an agreement or settlement is reached beforehand. The court will send both parties a proposed allocation to the small claims track along with a Directions Questionnaire.
The Directions Questionnaire will ask you details about your claim in preparation for a hearing, including the proposed track, court location, any expert evidence, witnesses and if there are hearing dates to avoid.
While claims are usually allocated to the track based on the amount that is being claimed, the judge can alter this based on other factors, such as the complexity of the matter.
Once both parties have submitted a Directions Questionnaire, this will lead to an order from the court confirming the track and giving a date for the hearing, exchange of evidence and a date for paying the hearing fee.
As with the other small claims court fees, the hearing fee for a small claim hearing will be based on the amount being claimed:
Fees correct as at 4 June 2021, but please see EX50 for full details and latest information.
Small Claims Mediation Service Cost.
The Directions Questionnaire will also ask if you agree to your claim being referred to the Small Claims Mediation Service. If both parties agree to this, then a mediation appointment will be organised by telephone and a mediator will attempt to reach a settlement over the course of an hour or so.
The HMCTS Small Claims Mediation Service is free of cost so should be seriously considered as an option. Also, mediation appointments will be available quicker than court hearings and you won't incur the Hearing Fee if the claim is settled at mediation.
If mediation fails, then the claim will proceed to a hearing and the Hearing Fee will become due.
Small Claims Expert Costs.
Depending on your dispute, you may require an expert to provide evidence to support your claim. You will need the court to grant permission to use an expert and if permission is granted you will then need to pay the expert to produce written evidence.
As with court fees, if using an expert has been approved and your claim is successful, the cost of the expert will be recovered from the defendant up to a maximum of £750.
What costs can be recovered in small claims?
If your claim is successful, as well as the court fees and approved expert costs, there may be other items you can claim and recover from the losing party.
There are various rules and limits around what can be claimed so it is always a good idea to get legal advice before starting your claim. Without legal advice then there is a risk you could miss out on recovering costs that you are entitled to claim from the opposing party.
Examples of small claim costs.
Unpaid Invoice or Loan debt of £1,400.00
£80.00 - Claim Issue Fee (due when you submit your claim)
Faulty Goods valued at £2,800.00
£115.00 - Claim Issue Fee (due when you submit your claim)
Poor Service or Workmanship costing £450.00
£50.00 - Claim Issue Fee (due when you submit your claim)
How much does a lawyer cost for the small claims court?
Although the small claims process is designed to be conducted without legal representation, many people still choose to use a solicitor and can recover some of these costs as part of their claim.
The way legal representation costs for small claim are calculated is complex and relates to the claim amount, how the Claim Form is served and the number of Defendants. There are then further costs that can be claimed if judgment is entered which depends on the amount claimed and how the judgment was obtained.
Correct as at 4 June 2021, but please see CPR Part 45 for full details and latest fees.
Therefore, if you choose to use a solicitor for you small claim, you can typically expect to receive around £50 to £130 awarded towards your legal costs if your claim was successful.
The relatively low legal representative costs that are recoverable in the Small Claims Court is the reason you don't see 'no win no fee' funding being an option when dealing with small claims. So if you do decide to seek legal help with a claim, ensure you look for a law firm offering fixed fee small claims services.
Do I need a solicitor for the small claims court?
While you may not be able to recover all your legal costs as part of your claim, there are still some compelling reasons to consider instructing a solicitor for a small claim.
Firstly (and most importantly) a solicitor will be able to advise you on the law and your prospects of success. Spending money on issuing and attending a court hearing only to have no basis for a claim would be an expensive mistake.
Secondly a solicitor will be an expert on litigation and the court process, ensuring you comply with the relevant directions/deadlines and that your claim is comprehensive. If your claim is significant, missing out or even miscalculating an item such as your interest entitlement can prove costly.
Finally, even if your claim is successful and judgment is awarded in your favour you may still need to enforce that judgment. A lawyer can advise you on the most cost effective and productive enforcement methods that are available.
Should I take someone to the small claims court?
Taking a person or a business to the small claims court isn't free and not without risk. Knowing the potential costs along when fees will require paying is likely to influence your decision on if it is worthwhile process to undertake.
However, if your claim has merit and you can afford the court fees, then many of your small claims court costs will be awarded back to you should your claim be successful.
Catalyst Law are team of legal professionals with over 20 years' experience helping businesses and people with their legal problems.
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