When contract disputes arising, it can be difficult to deal with them. Not only can it be time-consuming and costly, but it can also be extremely frustrating. Making a decision that is based on your business’s best interests is the most important thing when it comes to settling disputes.
So, how can you find a resolution that works for all parties? Here are some top tips to point you in the right direction.
Review The Contract
The very first steps involve reviewing the contract carefully to determine the severity of the dispute. If the breach is serious, the contract could be terminated, with the innocent party having the legal right to make a claim for damages in respect of their losses. If the breach is less serious, only damages that were directly caused by the breach may be claimed by the innocent party, with the contract remaining in place.
When you review the contract, you need to check the law that governs the contract – which country does it belong to? That will determine what your rights are. You also need to check for non-binding ADR (alternative dispute resolution) clauses in your contract. If one is present, you can use mediation, negotiation, or early neutral evaluation to resolve the problem.
Checking the contract for a jurisdiction (binding decision) clause is also important. This clause enables the dispute to be submitted by the parties to another third, neutral party, who can determine the best way of settling it.
Finally, you should check to see if an escalation (or tiered dispute resolution) clause is included in the contract. This clause outlines the steps that need to be followed by the parties and allows the parties’ representatives to be used at first to resolve disputes amicably by ordinary negotiation. Should this fail, the dispute would escalate to the non-binding ADR option before finally progressing to the binding DR decision.
Alternatives To Litigation
As mentioned above, there are both non-binding and binding options that can be used as alternatives to litigation. Non-binding ADRs focus on the parties coming to a consensual resolution “without prejudice”. This process is inexpensive, speedy, and flexible, and the positions of both parties are not compromised if no settlement can be reached, and another resolution method must be used. Negotiation, mediation, and ENE (early neutral evaluation) are the three top non-binding methods.
Should no settlement be reached via non-binding options, a binding option like arbitration, adjudication, or expert determination can be used. These options are more structured but are less costly than litigation.
Litigation
In general, court proceedings are a last resort but sometimes they are necessary to resolve contract disputes. Nevertheless, Pre-Action Protocols must be considered before any claim can be commenced. If those rules are overlooked, penalties will be levied when the proceedings reach their later stages. The CPR has several Pre-Action Protocols, but sometimes none will apply to the dispute in question. If that is the case, the PDPACP (Practice-Direction on Pre-Action Conduct & Protocols) provisions should be given consideration. While this isn’t mandatory, the court can order sanctions if a party fails to comply with it.
Usually, litigation is provided for within the contract should the parties be unable to resolve a dispute so long as other resolution options were tried first. Litigation means going to court, and it is enforceable and binding. Unfortunately, it’s also expensive and slow. Nevertheless, it may be the right choice for parties with numerous disputed issues who cannot find a resolution.
