6 Tips to Avoid Commercial Litigation

Six tips to avoid Commercial Litigation

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Disputes can be stressful, time consuming and damaging to your life and business.  Emotions can run high and otherwise rational people can be consumed by emotion in the midst of a dispute.  Often, prolonged litigation suits no one, particularly when there is a relationship to preserve.

Due to the unpredictability of events and the inability to control other parties, disputes are sometimes unavoidable; however, there are ways that you can reduce the chances of your business being sued, or having to sue, and have strength in your position should you, despite your best efforts, become in embroiled in litigation.  We understand that long-drawn-out and costly litigation is rarely the best option for our clients.

In this article we explain how to maximise your position and avoid losses in your business by making sure that you can avoid or, if it proves to be necessary, improve your chances, in litigation.

The key piece of advice to have in mind is that the best way to try and avoid litigation is to plan for it from the beginning.

1. Who is your Customer

The first important thing to think about is exactly who you are contracting with.  Often when it comes to dealing with another business the situation can become complex.

If you are supplying to a business you need to know whether that business is a company, a partnership, a limited liability partnership or the business of a sole trader.

Once you have identified your customer then unless you are going to require payment upfront, running a credit check will help to determine whether you are going to give credit, and if so, how much.

Please make sure that you research and discover the exact name and legal status of the business with whom you are contracting.  Make sure you have the full names and addresses of the people with whom you are dealing with.  If you are contracting with the business then carry out enquiries with Companies House to obtain an overview of the current trading position of the business.

2. Get your agreement with your Customer in writing

Make sure that you understand the terms of your contractual relationship with your customer.  It is easy for things to turn sour when there is nothing in writing documenting the agreement or variations to that agreement between the parties.  It is important to ensure that any agreement that you have is captured in writing and any variations to the original agreement are also documented and signed off.

Drafting an agreement which clearly sets out what happens when a business relationship breaks down can minimise the cost of resolving a dispute.  Our clients often reflect following the conclusion of a dispute and lament at not getting their contract with their customer right at the beginning.

3. Keep your Customer in the loop

One of the best ways to avoid a disagreement is to ensure that everybody knows what is going on.  This may include informing them about increases in costs, budgets and scheduling.  This step can often arise when you fail to meet a deadline or attend to seemingly minor things like returning e-mails.  This can go a long way to avoiding the risk of litigation.

4. Act before it escalates

If you adopt a pro-active attitude and deal with any issues as and when they arise, you can often avoid it growing into a significant problem.  Often clients will ignore the situation hoping that it will go away.  It is best to try and pre-empt any problem by either tackling the issue upfront or to seek advice from an appropriately placed professional before it escalates.

5. Keep good records

We would suggest that you implement a document retention policy.  This will ensure that documents are preserved and easy to locate. Taking this step is crucial if a dispute is looming or a claim has commenced; not only will it help to construct your case if you have all the important documents available for your legal advisor but parties owe a duty to the Court to ensure that documents are preserved should they be required (whether they support or adversely affect your case).

Documents to retain include anything recorded whether in permanent or semi-permanent for such as letters, contracts, receipts, diaries, computer records, photographs etc.  Also if you have any other property connected with the matter in any way you should preserve that property until the case is concluded.

6. Consider the best way to resolve the dispute  

Whilst a business may be hopeful that the risk of a prospective dispute will be abated, or be determined prior to the commencement of proceedings, it is prudent to consider alternative ways to resolve the dispute.  All too often parties are far too eager to enter into protracted and often hard fought litigation.  However, the first priority is to understand your objectives.

After evaluating your position, it may be appropriate to explore earlier resolution through open and frank discussions with your opponent, and the use of mediation and Alternative Dispute Resolution processes.  Often, to try and manage the relationship, clauses outlining the method of dispute resolution can be included in your contracts and terms and conditions of business.  This is of particular importance where your opponent or its assets are in a foreign country.

Glyn Staves - Head of Dispute Resolution

Glyn Staves

Head of Dispute Resolution