Disputes are an inevitable part of any organisation’s life. The fact that a dispute has arisen should not reflect badly on you – but how you deal with it may do. Important relationships, money and reputations can be lost. On top of that, the outcome of litigation is never certain. So how should you deal effectively with disputes that arise, whilst minimising the risks?
Here we set out 10 tried and tested ways to achieve Early Dispute Resolution:
- Acknowledge the problem and address it immediately.
- If your contract has an escalation procedure to deal with disputes, you should use it. These processes work by a combination of escalating the discussion beyond the stakeholders who were personally involved in the dispute, providing a defined process and enabling greater understanding of the other party’s version of events (as well as your own). They also allow the parties to retain control of the outcome of the dispute.
- Assess the strength of your position. Gather the key facts and documents. Review what has happened, analyse the problem and the strength of your legal position.
- Consider your optimum outcome. Then, consider the range of acceptable outcomes, running from most to least acceptable.
- Consider the wider commercial context. Can you settle the dispute as part of a wider commercial arrangement, such as extending the contract or offering reduced rates for future work?
- Based on that analysis, formulate a clear, realistic and achievable strategy to achieve your range of optimum outcomes.
- Engage constructively with the other party and keep a line of communication open. Try to arrange face to face meetings to resolve the issues. If necessary, any meetings can be on a ‘without prejudice’ basis (which will mean that anything said at the meeting cannot be used in Court, should it not prove possible to resolve the dispute).
- Ensure that you position yourself in the best possible way in correspondence. Do not make any unnecessary or accidental concessions.
- If you do resolve the dispute, make sure that you have a clear, unambiguous, written record of what was agreed, in order to avoid a further dispute. Often, it will be best to record what you have agreed in a binding settlement agreement, particularly if the dispute was high value, long running or business critical or any one or more of these.
- If direct discussion with the other party fails to resolve the dispute, consider proposing mediation (this is a form of negotiation to resolve a dispute, facilitated by a paid, independent third party). You can engage in mediation before legal proceedings have been threatened or issued, which can often break a deadlock when simple face to face negotiations have failed.
Our Early Dispute Resolution service provides a structured, tested way to achieve early settlement of commercial disputes. We adopt a straightforward, proactive approach, creating a strategy which includes both the legal aspects of the dispute and the commercial implications. We can advise you behind the scenes or represent you in negotiations or mediation.
Case Study: How a housing association could have benefited from early dispute resolution
- A contractor, unhappy with the agreed contract rates, performed its obligations unsatisfactorily.
- Numerous tenants complained and the housing association held a series of discussions with the contractor. These produced temporary improvements, although the service remained unsatisfactory.
- The dispute resolution provision in the contract was not used.
- After several years, the contractor’s performance became so bad that the housing association threatened to terminate its contract.
- Negotiations dragged on with the contractor disputing the allegations and the housing association uncertain if the performance was bad enough to allow it to terminate. It finally decided not to terminate as there was less than a year left for the contract to run.
- The problem was never resolved and the contractor continued in place until the end of the four year contract term.
What should have happened?
- As soon as the problem arose, the housing association should have checked exactly what the contractor’s obligations were under the contract.
- It should have discussed performance issues with the contractor and followed up in writing.
- It should have monitored the contractor’s performance and written to them formally if it did not meet the required contractual standard, explaining the shortfalls and failure to rectify the problem, and requiring immediate improvement.
- It should have continued to monitor performance. If performance still did not improve/meet the required standard, it should have consulted the contract to see what remedies it had. The remedies may include:
- Serving notice to remedy a material breach within 30 days
- Raising a formal dispute under any dispute resolution procedure in the contract.
- Actively managing the problem by implementing an appropriate remedy with the result that:
- the contractor improves to meet the required standard; or
- a clear paper trail exists to justify termination of the contract and claiming damages for breach; orsome other contractual sanction (such as liquidated damages for failure to meet contractual service levels) is imposed.