EFFECTIVE DISPUTE RESOLUTION STRATEGIES

In this second edition of Law Bites I will focus on how to successfully manage commercial disputes.

1. Prevention is better than cure.
Everyone hopes that they will never be involved in a commercial dispute. Protracted and expensive litigation or arbitration is not an appealing prospect. Disputes are, however, an unfortunate fact of life, so it is more a case of minimising your company’s exposure to the risk of a dispute.

Whenever possible and practical, use a written contract rather than rely on an oral contract. A standard form contract will cover the essential terms and conditions for a simple commercial transaction. A bespoke contract will deal with more complex matters and should adequately address all the major considerations, including the assignment of risk in a project or commercial transaction. Don’t leave things ‘loose at the edges’ and make sure you protect your business’ reputation and legal position.

A written contract should contain the following terms: Parties – Names and addresses of the parties to the contract. Definitions and interpretations. Payment provisions. A specific description of the goods or services. Term of the contract. Timescale. Limitation of liability. Termination provisions. Change of control (during course of contract). Dispute resolution clause. Confidentiality clause. Intellectual property rights. Warranties. Indemnity clause. Force Majeure clause. Assignment clause. Governing law clause.

2. Have in place good dispute management policies
A dispute is sometimes akin to a game of chess, namely tactical in nature with plays and counter-plays, so try to see the big picture. Dispute resolution is in itself a risk and the use of good management techniques should become routine for the successful management team. Be full and frank with your lawyer from the outset. Nominate a ‘point man’ to act as the day-to-day contact for your lawyer. Be prepared for a good lawyer to challenge you on some of the more problematic areas of the dispute which the other side may seek to exploit to your detriment. Many years ago, I was witness to a case imploding on the first day of a trial due to the lawyer becoming too friendly with a client possessing a strong personality and definite opinions about the presentation of the case. The lawyer was reluctant to play devil’s advocate and challenge the client’s defence to the claim.

3. Prepare a paper trail 
Diaries, minutes of meetings and emails can be of vital importance during any dispute. Make sure proper records are kept and that your filing systems are up to date.

4. Adopt a commercial outlook for dispute resolution
I am never too surprised to see warring parties decide on the first day of a hearing that they finally need to settle a dispute. The reason? Well, a previous mutually beneficial relationship and the prospect of perhaps working with the other party again in the future. The years spent building and developing that commercial relationship are simply too valuable to lose in what may later be seen as an expensive misunderstanding.

Aside from the legal costs, never underestimate the management time and stress which is involved in the dispute resolution process. A tough, successful underwriter once admitted to me that he was not sleeping well a few days before the start of an arbitration. He was very happy when the case settled and he no longer had to give evidence and be cross-examined. He could return to his day job and earning a living!

5. Use lawyers effectively 
Involve lawyers at an early stage to marshal the evidence, to identify the issues, give preliminary advice on the matter and develop a strategy. Make sure that they are fully involved with the company so that prompt and full instructions are given.

6. Use experts in the right way 
Use experts wisely. Ensure they are truly independent, have the right pedigree and experience, particularly if they are likely to be giving evidence. Not someone who just says what you want them to say!

7. Consider mediation 
Explore the possibility of mediation. It is an increasingly important forum to resolve disputes cost effectively, expeditely and privately. Never lose sight of an opportunity to settle. A formal mediation is not always necessary. It is not a sign of weakness to contact the other side and to try to settle. Rather, it is a sign of strength.

8. … And finally 
If a dispute does occur - stay calm, don’t panic. Contact me and I shall be very pleased to assist. This article contains general advice and comments only and therefore specific legal advice should be taken before reliance is placed upon it in any particular circumstances.

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WINNING THE BATTLE OF THE

SMALL PRINT

  
‘As so often happens in the commercial world, those dealing with the projects had little or no interest in what might justifiably be called the small print.’

The above quote from a judgment in a recent case highlights the importance of paying attention to the terms and conditions of a contract, more commonly referred to in business as the ‘small print’.

But no matter how well these terms and conditions are drafted and understood, a common problem is competing terms and conditions between buyer and seller. This can sometimes lead to a dispute between the parties as to the applicable terms and conditions that have been incorporated into the contract where there is no signed contractual document. The so-called ‘battle of the forms’ or ‘small print’.

In law, an agreement and a contract are different animals. A contract is formed when an offer by one party is accepted by the other party provided there is consideration (normally the price) and a mutual intention to create legal relations. It is important to identify the precise moment when a contract comes into existence, because the question of which party’s terms and conditions apply to the contract can then be determined.

HOW TO WIN THE BATTLE OF THE SMALL PRINT ?

A successful party needs to take sufficient steps to bring its terms and conditions to the attention of the other party. In reality, it is the last set of terms and conditions despatched before the contract comes into existence that wins and will be deemed to be incorporated into the contract.

Therefore, try and include your terms and conditions in as many pre-contractual documents as possible.

One strategy is to refrain from discussing the other party’s terms and conditions as an issue before sending your own just before the contract comes into existence. In practice, this date will be before performing, delivering or receiving the respective goods or services.

A more direct strategy is to carefully read the other party’s terms and conditions and discuss any particular clauses which are onerous or of concern. Even better, let your lawyer review them and advise! A side letter to lessen the impact of onerous terms and conditions or exclude them is an option and part of the commercial negotiations between the parties. A Court should, in these circumstances, find it much easier to determine who has won the battle of the small print.

A FEW WORDS OF WARNING

• Check that your terms and conditions are kept up to date and regularly reviewed by a lawyer. Use clear and precise language. 
• Read the other party’s terms and conditions for onerous terms. Negotiate if possible but remember that it is the last set of terms and conditions sent and brought to the attention of the other party before the contract is formed that wins. 
• Understand that an agreement is not always a contract and that specialist legal advice should be taken as to the distinction and whether the agreement is enforceable. 
• If a contract is substantial it is sensible to have the contract prepared or checked by a lawyer to ensure that there is a single document with no uncertainty as to the relevant terms and conditions. 
• If you do amend or update your terms and conditions, make sure you delete the old ones from the system and bring the new ones to the attention of your clients or customers at the first opportunity. 
• Do not think that sending out the terms and conditions after the contract will wash. It will not! 
• Finally, be on your guard about the phrase ‘terms and conditions available on request’. Do request them as otherwise they risk being incorporated into the contract! 

This article contains general advice and comments only and therefore specific legal advice should be taken before reliance is placed upon it in any particular circumstances. 
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