Avoiding contract disputes – What to do if a dispute arises

Litigators typically see clients when the dispute has already escalated to the point where the parties want to sue each other. At that stage, the chances of avoiding litigation and the options for resolving it are limited. Exploring the possibilities for a negotiated settlement is one of the litigator’s key roles before litigation is commenced and at every step of the litigation.

Remember, whether or not litigation is worthwhile depends on three things:

1. Your prospects of succeeding.
2. How much it will cost you (money and time) to litigate.
3. Whether you will recover the judgment from the other party if you are successful.

Don’t get me wrong…there are times when you need to litigate and it’s always handy to know you have good prospects of enforcing your rights in the court if you need to. Theodore Roosevelt said, “If you speak softly and carry a big stick, you will go far”. He was talking about international diplomacy, but it’s an equally appropriate maxim for negotiating commercial disputes.

If, despite your best efforts, a dispute arises with another party, you need to do the following:

• Look at the contract – In particular, look at the dispute resolution clauses so that you know what options you have for resolving the dispute. There may be specific protocols you need to comply with.
• Get advice promptly – Seek advice before you take any steps to resolve the dispute. You might inadvertently be making an election (between damages or specific performance of the contract) about what remedy you will pursue, so legal advice is important. Equally important is to canvass your expert’s opinion about any technical issues, so that you know whether you’re on solid ground. Remember the adage: information is a negotiator’s greatest tool.
• Without prejudice – Make sure any settlement negotiations are without prejudice. They will be in any event, if there are attempts to resolve the matter, but it’s best to make sure the other side understands that too.
• Don’t waive privilege – Make sure you don’t waive privilege in relation to any legal advice you have obtained. In particular, don’t refer to any legal opinion you have received.
• Manage your documents – Get your documents together and in logical order. This is particularly important if the dispute is likely to unfold quickly.
• De-escalate – Consider whether there are any parts of the dispute that can be resolved quickly, so that you can concentrate on more important aspects of the dispute. Remember the objective is to de-escalate the dispute, not make it broader.
• Alternative dispute resolution processes – Even if the contract doesn’t have a specific protocol, there are plenty of organisations that can offer dispute resolution services to assist commercial parties to resolve disputes.
• Reality check – Get a realistic assessment from your legal team about the costs and timing that will be involved in litigating the dispute. You will want to pitch any offers to settle to the other side, or consider any offers from them, with this important information at hand. You need this early in the dispute, before either party has sunk time and money into the dispute. Project scoping is very important.

Please contact us if you have any questions in relation to contract disputes. We can provide specialised legal advice in relation to contractual rights and obligations.