How to deal with contractual disputes

Inevitably from time to time when in business there will be contract disputes, particularly with regard to alleged breaches.

In terms of how to deal with contractual disputes, you will wish to seek a resolution in the most commercially viable way. As part of this process, you may be contemplating bringing court proceedings as a result of this breach of contract. Before you get to this stage, there are procedural steps to take.

Steps

1)      The first step is to establish what you want to achieve out of this dispute. Do you want or need a swift conclusion to matter over the highest possible financial return? Is the dispute damaging your business? Is it important to resolve the dispute in a manner in which you can still maintain a business relationship with the other person? Having clear objectives in mind will allow for you to ascertain next steps.

2)      The next step is to establish who the parties are. It is vital to ensure you know who the potential parties to a claim are. Business relationships can be complex with various subsidiaries. A claim can default further down the line if you engage with the wrong subsidiary of a business. Additionally, to this, in terms of understanding who the parties are, it is important to consider the viability of the business you are considering taking action against, i.e., do they have any money?

3)      The next step to consider is evidence. You will need to collate evidence. Examples of key evidence would be, ideally, a written contract to view. A contract however can be established without an expressly written contract, through email correspondence, invoices, and purchase orders, and simply the exchange of goods and money. A contract can also be formed verbally.

4)      We have mentioned issuing a prospective claim but you should not always launch into litigation, which should be considered as last resort. There a various way of resolving a dispute without entering litigation. This could be negotiations between both parties, mediation, or adjudication. Sometimes a contract may even obligate the parties to resolve disputes this way.

5)      There are certain protocols which govern what steps parties must take before issuing a claim with the courts. The protocols are in place to allow the parties to establish the issues that are in dispute, share information that is available regarding those issues, and endeavour to resolve the matter without issuing proceedings. For a breach of contract, a Letter of Claim will be sent, which includes; the background of the matter, details of the agreement, the breach of the express and implied terms of the contract, the losses, and proposed resolution. A well drafted Letter of Claim will let the other side know that you are serious and ready to issue proceedings. You must allow the other side time to respond to the letter and the letter of response should address the issues in dispute, and then state whether liability is admitted or denied.

6)      If you have not managed to settle the dispute and you have established and/or exhausted all of the previous steps, the next step would be to issue proceedings. Settlement negotiations and other alternative dispute resolution can continue you throughout the litigation process to settle the matter before it reaches Trial.

Contact us

If you are contemplating bringing forward legal proceedings in relation to a breach of contract, or if you believe a party may potentially bring proceedings against you, it is imperative you seek legal advice at the Pre-Action stage. If you need any further advice with regard to your contractual dispute, please get in touch.