Commercial disputes: any company, however good its risk management policies, can be hit by a legal claim. Paul Green offers his guide to dealing with one.
| Author | Green, Paul |
| Position | Technical matters |
Nobody wants to think about disputes
until they have one. But all too often companies find themselves stumbling into conflicts that they didn't see coming, without knowing how to deal with them or how they could affect the business.
For many, the simple answer is to run to a firm of lawyers. Although that is often necessary, there are several other steps that managers should consider at the outset to ensure that the dispute is managed efficiently and cost-effectively, with minimal impact on the business.
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An essential part of risk management is the ability to anticipate potential problems and prevent them from reaching a courtroom. Being sued is a stressful, time-consuming and costly process. Even if your company succeeds in defending the case, the disruption can outweigh any financial gains. A key objective, therefore, is to avoid litigation in the first place. But economic crises tend to lead to more legal action: commercial failures can upset loan repayments, while insolvencies spark competing claims among creditors. Other claims can be caused by a change of heart--the motivation to recover money quickly is greater when business is bad.
Minimising the impact of litigation on your organisation can be separated into two stages: first, during the normal course of your dealings with a client; second, once you're aware that a legal claim is imminent or has been issued.
A fundamental rule in business is not to do any work without first having a contract in place. The contract should be in writing, where possible, and define the scope of the services being provided and the terms of remuneration. Without a written contract, the likelihood that a misunderstanding will arise between your company and a client is much higher. Furthermore, if a claim is issued against your company, you'd have no physical evidence of what was agreed. Contracts can always be renegotiated, even after they have been signed, but you should ensure that any alterations made are meticulously documented.
Many claims by clients are based not on serious legal issues but on their dissatisfaction with the service provided. It's essential, therefore, to treat clients with respect and keep them well informed. Problems such as exceeding cost estimates or missing deadlines are most easily tackled by assessing such risks early and informing the client as soon as possible. If the client is unhappy, having been informed by you of a problem, then their complaints...
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