How to avoid commercial disputes and minimise litigation risk

Last updated: 8 November 2021

Estimated reading time: 5 minutes

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When growing a business, we understand that thinking about potential future disputes and the best ways to avoid them might not be at the forefront of your mind amidst the excitement and exhilaration surrounding getting your dream venture off the ground. However, savvy thinking at the outset can pay dividends in the long run, so we’ve produced this guide to help with focusing your mind on some key considerations that, if taken on board, should make your professional life easier in the long run.

Jump to:

  1. Types of disputes and how they can affect a business
  2. Tips on how you can minimise commercial disputes
    1. Employee contracts: seek advice to get them right
    2. Staff training & in-house policies
    3. Due diligence before entering into new commercial relationships
    4. Commercial contracts: avoid pitfalls
    5. Keeping your commercial contracts under review
    6. Consider whether a non-disclosure agreement is necessary
    7. Have a robust system in place for retaining & recording correspondence and documentation
  3. What to do if things go wrong
    1. Be proactive & act quickly
    2. Alternative dispute resolution: keeping matters out of court
    3. Seek specialist legal advice

Types of disputes and how they can affect a business

Our experienced business dispute solicitors have seen a range of problems arising that span the breadth of the commercial arena, examples of which include the following:

  • Internal problems such as fall-outs and misunderstandings with employees
  • Commercial contract disputes involving customers and suppliers (refusal to pay, problems with supply chains, allegations of defective products or services)
  • Intellectual property disputes arising from proper protections not being put in place
  • Former members of staff leaving to set up business in direct competition or moving to a competitor in the same industry

Tips on how you can minimise commercial disputes

Finding out how to avoid commercial disputes goes hand in hand with minimising litigation risk, so we’ve put together some tips and guidance below on the ways in which you can take steps to do just that:

Employee contracts: seek advice to get them right

The success of your business begins with you and your team, so it’s advisable to take advice from an employment specialist to ensure you have properly drawn up contracts in place which protect your company’s interests. You may opt to include restrictive covenants concerning what ex-employees can and can’t do if they leave the company, for example.

Staff training & in-house policies

One of the best recommendations that we can give when it comes to housekeeping for your business is the importance of having the right internal policies in place when it comes to training your staff, which should go beyond the initial new starter training. Having clear and comprehensive policies in place can all play a huge part in ensuring that your business is rock solid enough to withstand any potential disputes that may arise. These can include:

  • Policies that cover all aspects of employment (grievances, sickness and annual leave, etc)
  • Regular training on matters such as on how to handle complaints, and on legal issues such as contracts and negotiation, and idiosyncrasies pertaining to your customers and suppliers
  • Policies when it comes to the wellbeing of your staff

Due diligence before entering into new commercial relationships

Performing some basic checks before going into business with anyone new should be a primary consideration in your due diligence process. Don’t be shy with checking out Google Reviews, Facebook pages, LinkedIn profiles and websites such as Companies House or company credit checks – you can also search the bankruptcy and insolvency register.

Commercial contracts: avoid pitfalls

Once you decide that you’re happy to enter into a commercial relationship with a potential new customer or supplier, we strongly recommend having robust contracts in place that clearly set out each party’s rights, responsibilities and liabilities, the governing law, and a clause addressing how matters will be dealt with if things go wrong and a dispute arises. All too often, our business disputes lawyers see companies severely affected as a result of their commercial contracts being badly put together and this inevitably comes with a hefty financial price tag to put things right all too often – don’t let that happen to you. If you aren’t sure if your contracts cover everything that they should in a legally enforceable way, it’s best to reach out for support from a commercial contracts specialist.

Keeping your commercial contracts under review

It’s worth highlighting that you should periodically review your commercial contracts to ensure that they are kept up-to-date and relevant in accordance with changes in your industry, the law and the current economic climate – this is particularly important in the face of the Covid-19 pandemic and Brexit.

Consider whether a non-disclosure agreement is necessary

Non-disclosure agreements (commonly referred to as ‘NDAs’) may be a relevant consideration if a commercial transaction or relationship involves sharing confidential information with another party. For example, where intellectual property protection is yet to be agreed or finalised in a joint venture or a franchise purchase agreement is underway. Take a look at our detailed guide on Non-disclosure agreements: your questions answered for further insight on this topic.

Have a robust system in place for retaining & recording correspondence and documentation

It’s sensible to keep a log of all communications and documentation relating to a commercial transaction and ensuring that all staff are aware of their duties and responsibilities. This is because it’s best to prepare for the worst in case anything does go awry, and pragmatically speaking it takes away a layer of the stress that comes with managing a dispute if you can easily and quickly access all the relevant information.

What to do if things go wrong

If it appears as though something has gone wrong and a dispute is looming on the horizon, here are some key takeaways as to what you can do to minimise the risks of costly litigation:

Be proactive & act quickly

It’s crucial not to bury your head in the sand if something feels off or if a commercial relationship goes sour. Acknowledge the issue, tackle it head on, and try to arrange a discussion with the aggrieved party (or the party with whom you have an issue if the situation is reversed). Quite often, if addressed early enough, an amicable solution can be reached and a relationship can be salvaged without damage to your reputation.

Alternative dispute resolution: keeping matters out of court

The various forms of alternative dispute resolution available (or ‘ADR’) are an integral part of keeping disputes outside the arena of the courts – so much so that the Civil Procedure Rules place an extremely heavy emphasis on this by virtue of the inclusion of guidelines named ‘Pre-Action Protocols’. These Protocols explain the conduct and set out the steps that the court would normally expect parties to take before commencing proceedings for particular types of civil claims.

You can read more about ADR in our short article: What is alternative dispute resolution? You can also find a more detailed analysis about the different types of ADR available in our guide: Types of alternative dispute resolutions methods: choosing the best one for your business.

Seek specialist legal advice

Whichever stage you’re at with a potential dispute, our specialist teams possess a wealth of experience in working with each other to provide a tailored blend of bespoke advice to fit the exact requirements of your business. It’s definitely best to seek support sooner rather than later in order to minimise costs and litigation risks, so don’t delay in reaching out to secure the right help.

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