Litigation Lawyer Q&A: How to Deal with a Business Dispute

Picture this common scenario: You are swamped running your business when, with little warning, a dispute crops up that demands your immediate attention. Unfamiliar with the legal process, you panic about where this could lead and if it will end up in costly and prolonged litigation.

Aside from tax, handling disputes is undoubtedly the least enjoyable part of running a business. Most small businesses do not have the benefit of in-house counsel, and if a dispute arises, the dispute can eat up precious resources and detract from the main activities of your business. However, the stress of a nasty dispute can be alleviated by putting in measures to protect your business. We discuss some of these below.

Help me! What should I do if a business dispute occurs?

Always have a dispute resolution clause in your contracts: this will streamline the dispute process and at the very least you will know what to expect when a dispute occurs. The best practice is to have a dispute resolution clause which puts an obligation of good faith on both parties, and requires the parties to meet first to resolve the issue informally, before either party can take the matter to court.

Put a dispute resolution or complaint procedure in place: Putting a procedure in place helps a business deal with complaints fairly, quickly and consistently. Putting in guidance as to how you should deal with the other party also sets in place clear parameters, to ensure you remain professional and as objective as possible when communicating with the other party. This will minimise any potential harm caused by the dispute, including to your reputation.

Don’t sit on your rights: Often, people will procrastinate when dealing with a dispute because they want to avoid the stress and difficulty of it all. However, there are limitation periods in place which limit the time you are able to make a claim. It is important that as soon as a dispute arises, you make yourself aware of any relevant time limits and act accordingly. Sitting on your rights will adversely affect your ability to pursue your claim if you miss this deadline. In particular, regulators have very strict deadlines in place and often take a hard position about granting extensions.

Understand the dispute: You need to know all the facts before you can make an informed decision on how to move forward. Avoid making an impulsive and emotional decision. Collect all relevant documentation and correspondence so you have a clear picture of all the circumstances.

Discuss the dispute: Sounds easy enough right? You should always speak with the other party to try to resolve the dispute amicably before considering litigation. This will also help preserve the relationship and your reputation. However, never make any uninformed statements and avoid making any admissions without seeking legal advice first.

Get an opinion: Even where you are unsure or feel the incident may not amount to a substantial issue, seek expert litigation advice early before it escalates.

Try alternative ways to resolve a dispute: There are various alternative dispute resolution (ADR) options available, which are far more economical than court proceedings. These include: mediation, conciliation and arbitration. For international disputes, the Arbitration and Mediation Center of the World Intellectual Property Organization (the WIPO Center) provides several ADR services to assist in IP and technology disputes.

Should I just settle?

If those alternatives fail, there are various advantages to your company in aiming to settle a dispute over litigating:

It can take substantial resources to litigate and costs involved can be excessive. However, seeking outside legal counsel could significantly reduce these costs by providing expert assistance.

There are potential negative impacts on the reputation of your business and relationships.

Litigation is highly unpredictable and often is like rolling a dice. Factors can crop up at any point even where you may think you have the winning hand, but having expert legal advice can assist to mitigate this.

Court cases are generally a “loser pays” system and if you lose, you may be required to pay the other party’s legal costs. However, this changes in the US. In the US, both parties will bear the cost of litigation unless you agree otherwise by contract. This is intended to encourage you to settle as it can be very costly just to prove you are right.

Even if you are in the midst of litigation, settlements can take place at any point.

How do I prepare for a dispute?

You should always weigh up the options to settle a dispute outside of court before looking into litigation. If you have exhausted other remedies and litigation is appropriate, you will need to be prepared.

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