Key steps to take when a commercial dispute arises

It is important to act quickly as soon as you become aware of a dispute. The first steps you take are key to achieving the best outcome.  Here are five things to consider.

Appoint a manager

Decide who in the business will be responsible for managing the dispute and liaising with staff, the other side and third parties such as lawyers.  Make sure that everyone who may be involved, from sales staff to credit control, is aware of this to ensure a clear and consistent decision-making process.

Establish the contractual and factual position before acting

Ensure you make informed decisions.  Most commercial disputes revolve around contracts, but often the people dealing with the dispute don’t know what contractual terms apply, or simply assume, often wrongly, that the business can rely on its own terms and conditions. The contractual terms can significantly affect the legal position and therefore the available options. You may need to seek legal advice before acting.

Factual issues are often more complicated that they first appear. Many disputes arise, or are made worse, by a hasty decision taken without proper understanding. Make sure you get the facts straight.

Generate a helpful paper trail

Contemporaneous  documents carry a significant evidential weight at court and are much harder to challenge than oral evidence which is often given years after the event. Keep notes of conversations with the other party and, where possible, communicate key points in writing.

At the same time, however, be aware that there is a duty on those party to disputes to preserve relevant documents. If you go to court, you can expect to be ordered to disclose these, including internal documents and ones which may assist the other side.  Take care not to create documents which may subsequently undermine your position.

Check your insurance

You may have insurance which covers the underlying liability as well as legal costs.  If so, this can significantly alter your approach.  Insurance policies can have strict conditions about giving notice of disputes, making admissions and incurring legal costs. Make sure you check the requirements as soon as possible to preserve cover. Your broker should be able to help you.

Keep a commercial mindset 

It is very easy for relationships to deteriorate quickly during a dispute, particularly if you think the other side is acting in bad faith. Sometimes the instinctive reaction is to say: “see you in court” and pull up the drawbridge. However, court proceedings can be time consuming, costly and risky. In most cases, early settlement is possible and preferable. You should always be willing to consider other ways to resolve the dispute and be prepared to be flexible and pragmatic.