Common Dispute Resolution Methods to Resolve Commercial Contracts
By Jamie Costello, Last updated: 2022-07-25 (originally published on 2020-03-18)
Legal proceedings can often be a last resort as they are often incredibly costly and time-consuming.
That is why, when an issue does arise, it is important to actively work to resolve it in as quick a way as possible. This is especially the case when it comes to commercial contracts, which if they are breached can cost your business a lot of time and effort to resolve. Not to mention, in some cases you may rely on the contract, and a breach risks your livelihood.
So, with that in mind, here are some key ways that you can work to resolve commercial contract disputes using ADR.
What are the Most Common Commercial Contract Disputes?
When it comes to commercial contracts, typical disputes can cover any of the following issues:
- Non-payment for either goods or services.
- Below quality service/goods, or either of which do not meet the contract specifications.
- Misrepresentation (a statement made that is untrue to encourage entering into a contract).
A simple form of misrepresentation could be during the building of a wall, for example. A builder could promise specific materials, height or even colour to the person in order to have them agree to sign the contract to build the wall. But, then if the wall is not built with the right materials, is a different height or colour, then the builder would have misrepresented the service in order to encourage a contract being signed.
This is one of the most common forms of contract disputes and can come in many different forms, often which can be as simple as the wrong colour wall has been promised and not delivered upon.
In the case that neither party is keen to go to court, one of the key alternatives to pursue can be mediation. This is where both parties and a mediator sit down to discuss or work through the issue at hand. Ideally, both parties will then come to an amicable agreement that settles the dispute between them (usually with a reasonable settlement between them).
The mediator is responsible for ensuring that both sides are represented fairly in the mediation process. The mediator, therefore, is required to be an independent third party. They must analyse, assess and attempt to bring the two parties closer to the issue at hand in a sensitive way. Ideally, this also should be completed in a time-sensitive way.
Mediation is a good option if maintaining a relationship between the two parties is important and if both parties agree to maintain some sort of control over the situation. It is also a much more cost-effective form of dispute resolution, which is why many choose to pursue it – especially in relation to commercial contracts, which are already an expensive undertaking without added litigation costs.
When it comes to any form of dispute, choosing a form of Alternative Dispute Resolution (ADR) can be the best way to resolve the issue. As this means it can be done in a calm way that often can preserve the relationship between the two parties. As, even with the best of relationships, going to court can cause tension and strain even on the most solid of foundations.
Other forms of ADR includes negotiation (if an informal meeting between the two parties is still possible), conciliation (where the mediator is able to offer a solution and approach the two positions), and arbitration (where an arbitrator or panel of arbitrators decides upon the outcome/award given in a dispute).
When it comes to your commercial contracts it is important to consider all forms of ADR prior to making any rash decision for litigation. As it can be the best way to protect yourself, your business and preserve any relationships that may be compromised by the breach of contract.
Any business dispute can eventually be resolved in a court environment if no resolution can be achieved via other means. The court can then decide a solution which is beneficial for the aggrieved party. The court can then decide if the contract was breached, granting reparations to the party if it is deemed to have been so.
If both you and the disputed party are in the same country then it can be a much simpler process, as there will be no international court issues to navigate. Also, before taking a claim into court it is important to ensure the costs of the claim is not too high – as it will be more costly for you to contest than it will to be resolved.
Overall, the fact of the matter is that you need to understand what options are available to you once a contract has been breached. Where possible, your business should seek ADR to resolve issues in as simple and timely way as possible. As this will be the best course of action for your own business and that of the party who has broken the contract with yourselves.
However, if ADR in any form does fail then you always have the availability and right to resolve the issue in a court environment. But, litigation should always be a last resort where possible.
This article does not constitute legal advice.
The opinions expressed in the column above represent the author’s own.