Key things you should know before a commercial dispute.
Commencing or facing litigation or arbitration (“legal recourse”) can be a very stressful, time-consuming and expensive process for all involved. This article discusses some key ways to prepare before taking legal recourse.
- Do your due diligence
A key consideration when deciding to initiate legal recourse is whether your counterparty has assets against which to enforce a successful judgment. If there are no accessible assets, then it is doubtful that legal recourse is worthwhile as it could be just winning the case on paper.
- Understand the contract
It is important to understand the implications of the provisions. For example, understanding how you can terminate or exit the contract is critical. In practice, we have seen many companies (even large multinational corporations) terminate agreements with their counterparties, without fully understanding the termination clause and its implications. We strongly recommend that parties seek legal advice prior to terminating any agreement to mitigate the risks involved in any potential litigation or arbitration that may ensue as a result of wrongful termination. The dispute settlement forum, which might include the mandatory pre-litigation or pre-arbitration procedures, such as the negotiation period for the contracting party to settle the dispute amicably may be laid out in the contact.
In some cases, the contract might state that in the event that any party conducts material breach of the contract, the defaulting party shall be given time to perform remedies or rectify for a certain period of time. The existence of such a clause might restrict any party from bringing the dispute to a dispute settlement forum before the defaulting party is given its chance to rectify the situation or provide remedies.
- Reviewing each party’s performance of the contractual obligations
It is important to review each party’s performance of the contractual obligations. In many cases, there might be an opportunity for both contracting parties to conduct breach of material contract. If that is the case, it is important to review each other’s material losses. In the event that your counterpart has suffered more significant losses due to your non-performance compared to the loss that you have suffered, it will be not wise to initiate the legal recourse. Therefore, analyzing and having clear information on each other’s potential claims is vital prior to taking any further legal recourse.
- Keep relevant documentation
It is sensible to keep all documentation relating to your dealings, as they may become relevant if a dispute arises. In the event of a dispute, having copies of all relevant contracts, related emails, text messages, purchase orders and cheque receipts may help to facilitate and expedite the legal recourse process and strengthen your position. Prior to conducting legal recourse, it is wise to keep lines of communication open with your adversarial party and, if possible, obtain a written acknowledgement of the debt, perhaps by requesting an acknowledgement for accounting purposes. Once such an acknowledgement is obtained, it becomes very difficult for the party to fight any claim that may subsequently be brought.
How Schinder can help
Our team of lawyers have extensive experience representing dozens of companies in commercial disputes before court litigation as well as in arbitration proceedings. Shall you need any services related to commercial contract and commercial dispute matters, please feel free to write to us at firstname.lastname@example.org .