Contract disputes are costly, and the return on your investment in resolving them can be unsatisfactory. The following tips for managing contract disputes can help save time and costs. Proper dispute management starts at the time of contracting, not when a dispute arises.
Dispute Management at the Time of Contracting
Dispute resolution clauses in your contracts should be drafted in a way that maximizes your chances of enforcing your rights efficiently. The aim is to obtain and enforce a settlement or final decision as quickly as possible.
The basic options for dispute resolution have been described previously in our Swiss Life Sciences Briefing. Regarding timing, if no settlement can be found, arbitration is typically quicker than court litigation to obtain a final decision if you choose the place of arbitration wisely. It also offers the option of fast-track or expedited proceedings, which can lead to a final decision within about six months, therefore it is worth comparing the different arbitration rules as to whether and under what conditions they provide for fast-track proceedings. For example, under the widely-used International Criminal Court arbitration rules, a sole arbitrator is appointed in fast-track proceedings even if the arbitration clause calls for three arbitrators, which may come as a surprise to many parties.
Fast-track arbitration is typically not suitable for complex disputes that require detailed witness statements or expert evidence. As this may be difficult to predict at the time of contracting, you should be cautious about agreeing to fast-track proceedings or any specific timelines. Ask yourself whether it would be possible for your company to prepare—within only two or three weeks—a full statement of defense or reply together with all relevant evidence, including written witness statements of managers or other employees who may be involved in other projects or traveling extensively at that time. If this sounds unrealistic, you should not commit to fast-track arbitration or specific timelines in your contract.
Saving Time and Money When a Dispute Arises
Here are five tips for saving time and money when a dispute arises:
- Manage the dispute proactively and promptly. Not only is this the best way to save time and money, it will also improve your chances of resolving the dispute amicably. Proactive management includes taking all of the legally required steps to asserting your rights, mitigating any damage, creating a paper trail and filling any gaps in the evidence.
- Secure all evidence. Collect all relevant evidence and store it in a well-organized manner. Identify and question the individuals with relevant knowledge within your company while their memory is fresh and they are still with the company. Get their statement in writing, preferably through external counsel to make it privileged.
- Do an early case assessment. A recent trend to save costs is to engage external counsel for a fixed fee to do an early case assessment entailing a factual and legal analysis. This helps you identify weaknesses in your case that can still be addressed, develop the key points that must remain consistent throughout the dispute, develop a negotiation and escalation strategy and focus the case on the essential issues.
- Obtain a reliable budget or alternative fee arrangement. For a reliable fee quote, you should provide external counsel with an early case assessment with sufficient information about the dispute. This should include the factual and legal complexity, the arguments raised, the number of potential witnesses and the volume of documents.
- Consider third-party funding. If you have a significant claim that is very strong but costly to pursue, consider asking a litigation funder to cover the legal costs in return for a share of the proceeds if the case is won (often 20 to 40 percent). Third party funding is increasingly used by financially strong companies as an alternative to tying up their own working capital. Carefully consider the disadvantages of funding before making a decision.
These tips are more fully addressed in a recent article for In Vivo, a well-regarded global publication in the life sciences space, which you may find here: Contract Disputes Trends in Medtech: New Trends In Dispute Management To Save Time and Money.