It’s an inevitable yet unfortunate fact that most businesses will at some point find themselves in dispute with a third party with whom they’ve entered into a contract. In this article, Beth Brierley at Riverview Solicitors considers what businesses should do if they’re faced with a dispute.
Disputes generally arise regarding late or non-payment of debts, but other examples might include:
*• disagreements about what was to be provided under a contract of
• the timescale within which goods or services were to be delivered.
One of the first things you should do is examine your business processes to see whether these could be adjusted to prevent problems arising in future. Also examine your contract with the other party and check the relevant terms and conditions, as these may specify how disputes are to be resolved between you.
If you haven't been able to resolve a dispute between you and another party amicably, you have a number of options. You can:
• make a conscious decision to do nothing;
• take action through the courts to resolve the issue; or
• use an alternative dispute resolution (ADR) process, such as arbitration or mediation.
The guidance below outlines what action you can take and how to go about it.
Consider whether it's sensible to take no action at all
Take into account the value of the claim, the prospect of success, the legal costs and the hidden costs of people’s time. Also consider the impact it will have on your relationship with the other party in the longer term.
There's no point incurring the costs of issuing formal proceedings, if the other side can't pay you, or you're unlikely to win. It's therefore advisable to get a credit rating from a credit reference agency before you take action, as this will give you information about any existing unpaid county court judgements against the other party and will give you a better idea of whether it's worth taking any action.
Once you have assessed the other party's ability to pay and your own prospects of success, you'll need to decide whether to pursue the matter through legal action, or using an ADR (alternative dispute resolution) process.
Take action through the courts
Taking legal action to settle a dispute can sometimes be avoided by writing a letter to the other party stating that you are going to take court action against them unless they take certain steps for example, paying an overdue debt, replacing faulty goods, or providing the services that they agreed to provide and the date by which it must be done. Make sure your letter doesn't imply that court action will result in the other party having to pay your legal costs, as this is a matter for the court to decide.
Alternatively, you can instruct your lawyer to write the letter as it often has more impact on the other side if they receive a letter from a lawyer. Speaking to your lawyer will give you a clearer idea of how strong your claim is from a legal point of view.
Court action is likely to be a lengthy and costly process. It's likely you will incur legal fees, court fees and other expenses, (like the costs of enforcing a judgement if you win but the other side doesn't pay). If you lose, you're likely to have to pay the court fees and the other party's legal costs, as well as your own. Bear in mind all the other 'hidden' costs, such as your time.
If you win the claim, the other party will be required to pay the amount
of the judgement, and any court fees and interest, provided you have
included these in your claim. If your claim is successful, you may need
to take further legal action to enforce the judgement if the other party
still doesn’t pay you.
Consider using arbitration or mediation
Alternative dispute resolution (ADR) is the term used to describe options for resolving disputes without going to court, including mediation and arbitration. These are becoming increasingly popular methods of resolving disputes, as they are often a cheaper and quicker way of reaching a solution that's acceptable to both sides. They're often also more likely to result in the business relationship being salvaged than a court case, so it's worth considering if the relationship is a valuable one to the business in the longer term.
In mediation the parties in dispute are helped to agree a resolution that's acceptable to all by an impartial mediator. The parties, rather than the mediator, decide on the terms of the settlement so it's essential that all parties want to resolve the dispute.
The process is completely voluntary so a party can't be forced to take part in mediation and they can choose to withdraw from the process at any time. If you agree to mediation but you can't reach a settlement you can still go to court.
Mediations are completely confidential and the information discussed within them can't be used in court or in any other legal action at a later date. You can find a mediator on the Ministry of Justice website: http://www.civilmediation.justice.gov.uk/.
In arbitration an arbitrator, who is an independent third party, is appointed by the parties to make a legally binding decision from which there are very limited grounds of appeal to a court. Arbitration may be either:
• ad hoc: where the parties determine whatever rules they may
consider appropriate for the arbitration; or
• administered: where the arbitration is conducted under the rules of one of the arbitral organisations, such as the London Court of International Arbitration or the International Chamber of Commerce.
Arbitration is used widely for international disputes, disputes between major corporations, employment rights disputes, and consumer disputes.
Beth Brierley, Lawyer, Riverview Solicitors
Beth is a member of the Riverview solicitors’ team. She is particularly experienced in employment law, advising on the full range of matters, including unfair dismissal and discrimination claims.
From 2009 to 2011, Beth gained further commercial experience as a
Technical HR Adviser for AdviserPlus, one of the UK’s leading business
solutions outsourcing companies, whilst still working one day a week at
a solicitors’ firm. Her in-depth knowledge of implementing HR solutions
for a range of blue-clip clients combined with her legal expertise makes
her an excellent choice for assisting corporates and SMEs in employment
and related matters.