The Truce is Over – Time for businesses to deal with breaches of contract and the like

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Published: 21st November 2021
Area: Litigation & Dispute Resolution

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According to a recent survey by accountancy firm EY, almost two thirds of businesses reported adopting a conciliatory approach to business disputes since the start of the pandemic in 2020.

By conciliatory that means generally granting or receiving extensions of time for compliance, or unsurprisingly given the exceptional times, 59% reported having to renegotiate contract terms entirely. In almost all cases those changes will have been to the detriment of at least one party.

The fact that special provisions were made, or different approaches were adopted, during a global pandemic is not surprising; however, it is hard to see how businesses can continue to ignore their rights, especially as they are squeezed themselves.

Equally many businesses lacked time or resources to bring potential claims or relied on government support. As government support winds down and comes to an end, and businesses start to return to a ‘new normal’, disputes cannot be avoided.

Do I have to go to court to resolve a business dispute?

Many business owners or company directors face that question regularly; the issue is slightly more complicated than it might seem.

Businesses or individuals don’t have to go down the court route to resolve a dispute. Alternative options such as arbitration, mediation and other dispute resolution techniques, are available and are sometimes more beneficial when combined with the right legal support. Equally, a number of changes in the litigation process make it an even more useful tool in the right hands.

However, while no party has to issue court proceedings, the company director that waives breaches or rights of action can expect to have an unhappy shareholder base to answer to if they decide not to go down this route.

Similarly, while we are all in favour of maintaining good commercial relations, unequal commercial relations, where one party takes advantage of another’s goodwill, will surely become more likely where parties do not enforce their fairly and carefully negotiated rights.

So although you don’t have to go to court and sue, you should at least consider all of your options - an experienced litigator can work alongside you to find a solution that works best for you and your situation, without necessarily going to court.

Is litigation expensive?

Although litigation does carry a cost, the same is true when businesses use the services of any third party. However, litigation expense doesn’t need to be an obstacle. Whether it be the use of funding products, which we are experts in or simply efficient litigation, costs can be managed.

Is litigation time consuming?

Litigation can take time to get to a resolution, but done correctly it is time well spent. The time taken to get a good resolution is time that would be looked upon far more kindly than time spent regretting taking the wrong decision. No lawyer can control delays in the court process but for the right case, such as breach of confidentiality, accelerated court processes are available. In summary, while time must be spent, it can be time very well spent.

Risks to image – will litigation make me or my business look bad?

Gone are the days when a party’s image was solely within its own control. However, carefully managed litigation need not have an influence on image or reputation.

A recent example

A company recently instructed us to issue a claim to remove defamatory publications claiming that their products were hazardous and potentially fatal.  Given that court proceedings will usually become public knowledge, bringing that claim to potentially greater public attention, seemed a risk. However, quickly resolving the dispute successfully turned our client’s reputation around and ensured minimal harm; as opposed to ongoing harm and damage.

Where reputations are damaged it can usually be traced back to how the litigation began and mistakes made by inexperienced practitioners or ill-judged hasty actions. If the process is handled correctly, these issues need not arise.

It is too much of a risk?

Although litigation involves a risk of losing and having to pay costs of the opponent, this is true across arbitration and court processes.  Ultimately, however, an expert litigator can advise you of any risk you may face in advance, and provisions can be put in place to mitigate these risks, such as insurance.

What if my opponent can’t pay what is due?

There is always the risk that a losing party might be unable to meet a judgment debt; however, enquiries can be made in advance as to the financial standing of parties before cases get too far down the line.

It’s worth noting that if your opponent has financial difficulties then they are much more likely to want to resolve matters in a quick, cost efficient manner.

If you decide to do nothing with your dispute, and it is a zombie company on the other side (a company that has a large amount of debt, but are just about able to operate to be able to repay the interest on its debts, but not repay the actual debt in full), then they can continue to do business with you and incur credit with you, but it’s highly likely you will be left as a so-called ‘tail-end Charlie’ with the greatest loss when that business finally goes under.

Cases are often resolved early with the right approach, or at least without court processes being engaged, if the right legal team is there to support you.

Our experienced team will work with you to manage your dispute with sensitivity to your commercial needs and drive it to a resolution using the best and most efficient process that’s right for you. We will cause the smallest distribution to your business and manage your risk.

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Daniel is a highly regarded experienced specialist commercial litigator and defamation expert

Litigation & Dispute Resolution Solicitors | Shakespeare Martineau

Litigation & Dispute Resolution

If a dispute has begun to escalate and your attempts to resolve have been left unheeded you may feel the time has come to escalate matters.

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