Contractual Disputes

Contractual disputes can arise before, during or after parties have entered into a contract.  Disputes with suppliers or customers can quickly become a problem, and can end up being a serious distraction and a cause for concern. If a problem arises, it is wise to address it quickly, in order to resolve the situation at minimal disruption and cost to you and your business.

Has there been a breach of contract?

A contract is a legally binding agreement between two or parties. It can be created verbally or in writing, and if in writing does not necessarily need to be signed. There is a common misconception that unless there is a formal, signed document, there is no contract, but this is not necessarily the case. 

A breach of contract occurs when a party to a contract fails to perform some or all of its contractual obligations.  If proven, such a breach entitles the other party to claim damages for any loss suffered.

The purpose of damages is to put the innocent party into the same position he would have been in had the contract had been performed correctly. Alternatively, the affected party may be able to seek an order of the Court for the contract to be performed, if this is a more appropriate course of action.

There is a 6 year limitation period for bringing a breach of contract claim, dating from the date of the breach of contract. In most cases, after 6 years, a party is legally barred from bringing a claim. (There are some exceptions to this general rule.)

How do I resolve my dispute?

The procedure to be used in the event of a dispute may have already been agreed when the contract between the parties was negotiated, or when the dispute arose. For example, some contracts contain a clause that in the event of a dispute, the parties must put the matter in front of an adjudicator.

If the contract is silent on such matters, the parties may choose how to resolve the dispute. Common techniques for resolving disputes include:

Negotiation: The most common form of dispute resolution where the parties themselves, or their legal representatives, attempt to resolve the dispute by discussion, offers and counter offers.

Mediation: A private and structured form of negotiation assisted by a third party mediator. Mediation can take place at any stage of a litigated case, and initially the process is non-binding. If settlement is achieved, the settlement agreement can become a legally binding contract. Mediation is much more flexible than proceeding to court.  For example, a mediated solution to a dispute could include not only an agreement for payment to pass from one party to the other, but also a method of regulating the parties’ future dealing or an apology. Mediation also gives decision makers the opportunity to make decisions at an early stage in proceedings, before costs escalate. It is usually confidential, and always without prejudice, so it can promote settlement and preserve business relations between parties which could otherwise be damaged as a result of sustained litigation and a trial.
Arbitration: Confidential and relatively quick (compared to litigation), arbitration can give parties more control and finality. Parties can select their own arbitrator or at least choose the body which appoints one.  However, arbitration is often no less costly than litigation, the deliberations of arbitrators may be less intellectually robust than the equivalent judge, and interim measures such as injunctions are more difficult to obtain.

Adjudication: Commonly used in construction and engineering disputes, adjudication is a specialist form of dispute resolution that is quick, straightforward and relatively informal. It is binding on the parties unless or until the decision is challenged in Court or in Arbitration, and so in some ways in only an interim resolution. It often proceeds on a very tight timetable (decisions are usually required within 28 days of the initial referral), and so parties to be organised and to have lawyers who understand the precise requirements of the procedure and can work to that timeframe.

Should you wish to obtain practical legal advice on your dispute and possible ways of resolving it, please contact Rachel Stewart or Alison Hume in our Litigation Department, for a no obligation discussion.
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