How best to handle business disputes

Michael Booth, associate partner, Prettys

Michael Booth, associate at Prettys law firm in Ipswich, says pre-contract preparation can manage the risk of a potential business disputes - Credit: Prettys

The early stages of a business relationship are crucial. They are the stages at which it may be possible to avoid disputes entirely – if the work is put in before any contracts are signed.

Find out about the other party

It takes two to tango, so they say. Therefore, the first step in trying to avoid a dispute should be trying to avoid dealing with people who might raise – or give rise to – a dispute.

The most obvious way to check whether the other party could cause problems – and something that a solicitor would hope happens in any business dealing – is to get to know the other person from the outset.

This could be as simple as sitting down and discussing whether they have the experience and know-how to complete the project.

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In some cases, due diligence will be more formal than mere discussions, such as a pre-contract questionnaire or formal works proposals.

However, be aware of sales patter, especially if from a sales department.

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It is also worth using formal sources to check details, such as a firm’s financial position, prior to making a deal.

Set achievable expectations
The information gleaned from pre-contract talks can help manage expectations of the business relationship.
It is better to under promise and over deliver, rather than the other way round.

If your customer is asking for the impossible, all you can do is fail their expectations.

Setting realistic targets will mean both parties get what they want out of the relationship.

It is also worth thinking about the customer’s obligation to pay – without this money, there is no commercial purpose to the transaction.

This obligation should be dealt with at the outset, with a clear strategy put in place as to how the goods or services will be paid for.

Draw up a contact
It is all too easy to assume if you don’t have a formal signed agreement in place that there is no contract – but in legal terms this is not necessarily the case.

Courts may be inclined to interpret events, such as email exchanges, as forming a contract, or consider that the contract is one party’s purchase order or standard terms of business.

Working out exactly what the contract is in such a situation can be far from straightforward. You should therefore try to make it clear at the outset what the agreed terms are.

Get the terms properly documented on the basis of the due diligence and the setting of expectations, and then get agreement to those terms from the other party.

At the very least, this process should mean that, should there be a dispute, everyone will know where to find the terms governing the contract.

Try to think about where things might go wrong and what the consequences might be according to these terms. If there is a potential problem, it is better to address it now rather than hope that it never arises.

One key thing to avoid is delaying the conclusion of the contract for too long. Before work starts under a contract, both parties have an incentive to agree terms.

With proper due diligence, setting achievable targets and a robust contract signed early, the business relationship can start in the best possible way. 

For more information on Prettys Solicitors, visit here 

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