If they are not dealt with properly and quickly, disputes can consume management time, disrupt cash flow, damage relationships and reputations and may escalate to formal proceedings being issued in court. Legal proceedings, while sometimes necessary, are invariably time-consuming and expensive processes, with uncertain outcomes.
Common early warning signs
Breach of contractual provisions
A customer or supplier may start to repeatedly breach their contractual obligations. This could include missing delivery dates, late or missed payments, or completely disregarding certain obligations. These kinds of breaches may be more likely to occur when a contract is ‘informal’ or only partly documented, or where the arrangement is heavily weighted in favour of one party. A contract which has a ‘light touch’ on non-performance or breaching behaviours can also lend itself to its terms not being respected.
Payment of invoices
An issue around the payment of invoices may signal cashflow difficulties. Issues may present as a customer or supplier having persistent invoice queries, disputing or deducting sums or taking longer than usual to pay an invoice. A supplier may make unexpected changes to contractual terms, such as shortening the period to pay an invoice or suddenly requiring an upfront payment.
Director or shareholder strain
Within a business, there can be disputes between the directors and/or shareholders. Indicators of disputes of this kind may include:
- Calling meetings to suit a party’s own availability
- Making decisions on behalf of other members of the board
- Voting deadlock in board or shareholder/ member meetings
- Directors not disclosing conflicts of interest or failing to perform in line with their duties, including under the Companies Act 2006
- Parties alleging that other directors or shareholders are not performing as they should
- Multiple director resignations.
Scope and quality disputes
An uptick in queries and complaints, particularly where levels of service are concerned, may indicate and lead to a claim over performance standards and/or warranties.
Use of intellectual property
Intellectual property is one of the most valuable assets of any business. If a competitor or other party is infringing intellectual property rights by, for example, using your business data, trademarks, patents or designs without permission, your business, and even your personal reputation and income, may be harmed. A common example of this kind of issue is where a former employee of a business uses similar branding or designs in a subsequent venture or uses your business’s client list.
Change in communication
A change in communication between parties may indicate that a relationship is deteriorating. Reduced responsiveness or the inability to reach a decision that would usually not be an issue are common examples, along with a party going completely silent.
Seeking legal advice
The key for anyone facing a potential business dispute is to seek legal advice as early as possible. Seeking advice at an early stage will help you avoid taking action that could lead to adverse cost consequences or perhaps weaken your position, and will give you as much time as possible to resolve the dispute without having to issue formal proceedings or face proceedings being issued against you. If you anticipate a business dispute, you should start to collate as much evidence as possible, which may include:
- Written agreements (in the form of a contract or otherwise)
- Any correspondence between the parties relating to the dispute in whatever form, that has been made
- Any other relevant documents such as invoices, purchase orders, staff policies and handbooks or intellectual property registrations
It is important to remember that each business dispute has its own characteristics – there is no ‘playbook’ that can be deployed to resolve every commercial dispute. The Commercial Dispute Resolution team at DMH Stallard has the experience and expertise you will need to guide you through every step of resolving a dispute and will help you to achieve the best and most cost-effective outcome in the shortest possible time-frame.
