Orr Litchfield

Solicitors and Business Lawyers

Commercial Contract Disputes

1. Contracts, disputes & contract management

Every business enters into contracts relating to the sale or purchase of goods and/or services of one type or another. The number, type and frequency of such contracts is likely to depend on a number of factors such as size, business sector, number of customers, operational structure and the relevant regulatory environment.

Some contracts may be critical to the running of the business, whereas others may be considered less important. However, it is important for business owners and managers to have a clear understanding of the key provisions of their business contracts and to manage them efficiently.

Most businesses will come across unexpected contractual issues and disputes at some point. When they arise, it is usually important to be able to manage and resolve the relevant issues as efficiently and effectively as possible in order to minimise disruption, save time and costs and avoid causing any damage to the reputation of the business. Where circumstances permit, the pro-active management of contractual issues and disputes may enable the parties to maintain or even strengthen their business relationship.

2. Advising and assisting you on contract disputes

Whether you are a claimant or a defendant in relation to a contractual dispute, we are able to provide efficient and effective legal advice and support in relation to your contractual dispute using our legal knowledge, experience and commercially focussed approach to resolve the contractual dispute in a way that is right for you and your business.

3. Resolving contractual disputes

There are several key stages in assessing and resolving contractual issues and disputes. These include:

(a) Step 1 - Identifying the contract and contractual terms and conditions

At the outset, it is vital to determine whether a contract exists and, if so, the relevant contractual terms and conditions. This is not always a simple task.

Contracts may be created in a number of ways, for example, in writing, orally, by the actions of the parties, by operation of law or by a combination of these. Oral contracts and those created by the actions of the parties or by operation of law are just as legally binding and enforceable as those set out in writing.

It is usually helpful to set out the terms and conditions of any contracts in writing so that the rights and obligations of the relevant parties are clear and can be reviewed, if and when required, in order to enable the parties to manage and resolve any issues which arise during the contract term with comparative ease. Where contracts are not reduced to writing, this task may be considerably more difficult, particularly where elements of the contractual relationship have changed over time. The parties will need to produce evidence (for example, written communications) in order to support their case as to the terms and conditions of the relevant contract. In certain circumstances, a written contract is required by law.

We can advise as to whether a contract exists and, if so, the relevant contractual terms and conditions of that contract.

(b) Step 2 - Determining whether the contract has been breached and what remedies may be available

Once the relevant contractual terms and conditions of a contract have been identified, it is necessary to determine whether a breach of contract has occurred and, if so, what remedies may be available.

The contractual terms may include provisions relating to the rectification of contractual failures, the resolution of contractual disputes and the grounds on which parties may terminate the contract. The nature and extent of any breach of contract is often important. Where one party has failed to comply with its obligations under a contract, that failure may be considered to be relatively minor and, even if it gives rise to a claim for damages, it may not enable the complaining party to terminate the contract. However, where there is a serious breach of contract, English common law may give the affected contracting party the right to terminate the contract (whether or not there is any contractual right to terminate).

We can advise as to whether a breach contract has occurred and, if so, what remedies may be available and consequently help determine whether it is likely to be in your interest or the interests of your business to pursue the breach of contract.

(c) Step 3 - Seeking an early resolution for contractual disputes

Normally, it is in the interests of the parties to identify and resolve any contractual issues and disputes efficiently and effectively so that they can continue to progress the contractual arrangement in an acceptable manner.

The contractual terms may include provisions relating to the rectification of certain contractual issues and the resolution of contractual disputes. Where this is not the case, it is often sensible to try to take steps to resolve any contractual issues or disputes. By way of example, the parties may agree to try to achieve resolution through direct discussions or some form of alternative dispute resolution.

(d) Step 4 - Letter before action

Where it has not been possible to resolve any contractual issue or dispute, it may be that it is necessary to formally notify the other party (or parties) that legal action will be taken unless the relevant contractual issue or dispute is resolved satisfactorily. This notification is usually sent in the form of a ‘letter before action’. It will, amongst other matters, set out the complaining party’s legal position, the outcome the complaining party wishes to achieve and the steps it proposes to take if a suitable agreement is not concluded.

We can prepare appropriate and effective letters before action and advise you on subsequent communications with a view to helping resolve contractual disputes.

(e) Step 5 - Alternatives to litigation for commercial contract disputes

It has become more and more common for parties which are in dispute to use alternative methods of resolving disputes prior to issuing legal proceedings or during the litigation process (typically at an early stage). The 4 main alternative methods of resolving disputes (commonly called ‘Alternative Dispute Resolution’ or ‘ADR’) in the UK other than court proceedings are negotiation, mediation, arbitration and conciliation.

Whilst ADR is not suitable for every dispute, courts often expect disputing parties to take steps to resolve disputes prior to commencing legal proceedings or at an early stage of the litigation process. An unreasonable refusal to do so may result in the court imposing sanctions (typically in the form of costs penalties) on the relevant party.

We can advise on the relevant form of ADR and assist you in relation to the ADR process with a view to helping resolve any contractual disputes.

(f) Step 6 - Court proceedings for commercial contract disputes

If it has not been possible to resolve a dispute, it may be that the only way forward is to commence formal legal proceedings. Where that is the case, we can help prepare your claim and provide clear advice on legal, procedural and tactical issues in order to assist you through the litigation process efficiently and effectively.

Contact us

If you would like more information about commercial contract disputes or would like to discuss a potential or existing dispute, please email us at enquiries@orrlitchfield.com, complete an Enquiry Form or call us.