Business-Dispute-shutterstock_298628975Business disputes and what to do

If you run a business, then unless you are very lucky, at some stage you will be chasing someone who owes you money. And if you are unlucky you may find yourself in a significant dispute with another party. While there is no fixed rule that can apply in every situation, you can certainly help yourself by following some simple guidelines.

In my experience people usually will try to resolve disputes themselves before they reach their wits end and seek legal assistance. Sometimes it gets to the stage where the debt is not worth pursuing economically or a dispute is put into the “too hard” basket. A simple dispute can also turn nasty, with things deteriorating rapidly. These disputes often involve matters of “principles” where the parties lose sight of what they were actually trying to achieve in the first place.

So in terms of guidelines, you might have systems to stop things escalating before they get out of hand. A credit check can help identify potential clients who are less likely to pay, and once a client is late in paying, a simple and friendly reminder can have a positive effect. Taking a reasoned and sensible approach to disagreements can also help with resolution of disputes rather than being aggressive and confrontational.

Naturally, having a well drafted contract with a client, supplier or customer is a good start. It will be much easier to get judgment in Court if you have a comprehensive contract rather than simple handwritten terms recorded on an A4 piece of paper – which I have seen before.

There are many ways of getting hold of a contract. Some are available online for a fee from specialist websites. People sometimes find a contract on the Internet from a similar business and pick and choose clauses that they think are important. The danger with the latter approach is that the contracts can sometimes be ineffective or plainly inappropriate. I have seen contracts obviously taken from the Internet referring to legislation from overseas that has no application to New Zealand law. It is always best to have a properly drafted agreement prepared by your legal advisor. While it is more costly in the beginning, it can save you considerable sums in the long run.

Another thing I recommend to clients is that they keep written records of important discussions. In a world where everyone uses some form of written media such as email or texts, there is no reason why a dispute that ends up in Court should come down to a “he said she said” argument with the Judge having to make an assessment of who should be believed. It is much easier to point to an email confirming a discussion rather than trying to remember what was said face-to-face or during a telephone conversation that took place months or even years in the past. It only takes a couple of minutes to send an email confirming the conversation.

Court is obviously the last choice when it comes to a dispute when all other reasonable options have been exhausted. While many people find Court expensive and time consuming, it is also the most effective way to get an outcome. A Court proceeding may also open up other forms of alternative disputes resolution such as mediation.

Asking a lawyer for advice when drafting a contract, structuring your business, or at the early stage of a dispute, is the best way to increase the odds that things will work out in your favour.