If you’re like most business owners, then its probably likely that at some point in the journey you have had a dispute, with either a client or supplier or whatever the case may be. Now, when such disputes arise, the next question invariably is, what does the agreement or contract say, followed by, how do you resolve it. In this podcast, Agnes Derrick a Commercial Litigation Lawyer from Murdochs, provides useful information as to how you may resolve commercial contract disputes.
Dan: In your experience, Agnes, do these types of matters occur regularly?
Agnes: Yes, they really do. Any business can find itself in the midst of a commercial contract dispute. These disputes arise when one or more parties to a contract breach one or more terms of that contract, or simply if the parties disagree about how the terms of that contract should apply in a particular scenario.
Dan: So, say I run a business and I find myself in a commercial contract dispute. What’s the first steps? I mean, what should I do?
Agnes:The first thing you need to do is try to pinpoint what the dispute is about. So narrow down the issues. Have a look at the contract in relation to your dispute. What has the other party done in breach of the contract, or what have they failed to do that is required of them under the contract? But make sure that you consider your actions, too. Have you complied with all of your obligations under the contract? By doing that, it will give you a better idea about the situation you’re in and then depending on the size of the potential dispute and the money involved, you may need to seek early legal advice on it.
Dan: Agnes, once the business owner has narrowed down those issues and looked at the contract, are they able to go ahead and negotiate with the other party? What’s your recommendation in that respect?
Agnes: I think once you’ve narrowed down the issues and you’ve got a better understanding by looking at the contract, you should try and speak with the other party off the record first about the dispute, and try to reach a sensible and commercial resolution. The contract might include specific clauses about what has to happen if there’s a dispute, so you might need to follow that path in the contract.
So really there you need to seek legal advice prior to commencing those types of negotiations so you know where you’re at. If you get your lawyer to review all the material relevant to the dispute; so your contract, any correspondence between you and the other party, that would be a good place to start. Because even though you might have a better understanding of it after you’ve looked at it yourself, lawyers are trained to draught and interpret contracts. So we’ll be able to advise you on your position from not only a legal perspective but from a commercial perspective. So we can give you all of your options moving forward, and any risks associated with those options.
Dan: Agnes, what about if the business sort of wants to enter into some informal negotiations? How should they prepare for that?
Agnes: If you’re ready to enter into those types of negotiations, you should make sure that heading into them you know your position, you have an outcome in mind, and you’re going to stay objective about it. So often, businesses who’ve been in a long-standing commercial relationship find it hard not to get personal when something goes wrong. Especially because trust that was built over a long period of time has been broken. Remember to try and focus on the issues and dispute and how things may be resolved. Why you need to have an outcome in mind, be commercial, open-minded, and flexible. It might be worth you compromising and meeting the other party in the middle if you want to keep your business relationship going.
Agnes: If your informal negotiations are face-to-face, then make sure that any verbal agreement reached is written down and signed by both parties at the negotiation. You should even consider having your lawyers present so that the written agreement accurately reflects the agreement reached. You can also consider having that agreement formally drawn up in a deed by your lawyer.
Dan: So, what happens if there is no agreement reached in that informal negotiation phase?
Agnes: If you get to the end of that negotiation phase and there’s no agreement reached, you should consider the other options that your lawyer has advised you about. So those options will depend on your contract and your dispute. It’s really a case-by-case basis, but some options might include mediation, arbitration, and always as a last resort litigation.
Dan: Now Agnes, like most legal issues, I’m assuming that getting advice early on these types of matters is imperative because they probably can spiral out of control fairly quickly. Is that your experience?
Agnes: Yes, that is my experience. The best thing to really do is come in and get some legal advice early so that you know where you stand before you make another move. That’s something that us at Murdochs can help you out with.
Dan: Agnes, thanks for joining me.
Agnes: No worries, thanks Dan.