When a legal claim lands on your desk, it can feel like a huge shock to the system. Whether it is a Letter Before Action from a supplier or a Claim Form from a client, your first thought is likely to be the same: What now? The clock starts ticking the moment the claim arrives, and how you respond in those early days can make all the difference to the outcome.
This guide is designed for business owners who suddenly find themselves dealing with a legal claim. You will learn what the documents mean, what deadlines apply, how to involve your insurer and what practical steps can help to protect your business, including ways to resolve disputes early and avoid unnecessary costs or disruption.
If your business has received a claim, our business dispute solicitors can help you act fast, assess your position and prepare a clear strategy that keeps risk and expenditure under control.
Contents:
- Why has my business received a legal claim?
- What should I do first when my business receives a claim?
- Do I need to notify my insurer about a legal claim?
- How do I prepare a defence to a legal claim?
- Can I resolve a legal claim without going to court?
- What will happen if the claim goes to court?
- How do I manage the impact of a legal claim on my business?
- What are the possible outcomes of a claim?
- How can I avoid future claims against my business?
- Summary
Why has my business received a legal claim?
This is a question almost every business owner asks when a claim arrives with them. In many cases, the answer is not that you have done something deliberately wrong, it is that expectations have clashed, communications have broken down, someone believes you owe them money, or they want you to do something that’s set out in the terms of your contract with them.
Most claims stem from commercial disagreements that have escalated. For example, a client may believe your business failed to deliver what was promised, or that the goods or services provided didn’t meet the agreed standards. Sometimes, a supplier or subcontractor might claim non-payment, arguing that you breached the payment terms of a contract.
Other common reasons include:
- Misunderstandings or unclear contracts – where both sides interpret obligations differently.
- Delays or performance issues – where one party believes deadlines or specifications were not met.
- Payment disputes – often arising from cash flow pressures or disagreements over invoices.
- Negligence claims – allegations that professional advice or services caused financial loss.
- Employment or discrimination claims – where current or former employees allege unfair treatment.
- Intellectual property disputes – involving brand names, content, software or designs.
Sometimes, the other party issues the claim as a tactical step, as a way to apply pressure and prompt a faster settlement. In other cases, it is driven by genuine frustration or poor communication. Whatever the cause, the key is not to take it personally. Legal claims are a formal mechanism for resolving disputes, and how you respond now can define how costly or disruptive it becomes.
If you are unsure what has triggered the claim, your business dispute solicitor can help analyse the background, review relevant contracts and identify whether the claim has legal merit or can be challenged quickly.
What should I do first when my business receives a claim?
If a claim arrives, your first instinct might be to panic or push it aside until you have had time to think. But delay is your biggest enemy. Courts impose strict deadlines, typically 14 days to acknowledge service and 28 days to file a defence. Missing them can result in a default judgment, meaning the court could decide against you automatically, even if you have a strong defence.
Start by reading every document carefully. Identify:
- Who is making the claim and what they are demanding.
- What evidence they are relying on.
- The specific deadline for your response.
Next, gather evidence. Contracts, emails, invoices and project records are your lifelines here. They form the foundation of your response and may help your solicitor identify weaknesses or inconsistencies in the claimant’s case.
Even if the claim feels unfounded, do not ignore it. Courts are unforgiving when it comes to missed deadlines. Instead, contact your solicitor as soon as possible. They will help you triage the situation: is this something that can be resolved informally, or does it require a formal defence?
Do I need to notify my insurer about a legal claim?
One of the most common (and costly) mistakes we see is businesses failing to tell their insurer early enough. Many professional indemnity, public liability and directors’ and officers’ policies require immediate notification of any potential claim, not just receipt of formal court papers.
Even if the letter looks trivial, notify your insurer the moment you receive it. Late notification could invalidate your cover altogether. When you contact them, provide:
- Copies of all claim documents and correspondence.
- A clear summary of what’s happened.
- Details of any contracts or relationships involved.
Your insurer will then confirm whether the claim is covered and may appoint their own solicitors to handle it. Sometimes, they will reimburse your legal costs; in other cases, they will manage the defence entirely. Either way, keeping them informed ensures your business stays compliant with the policy and protected from unexpected costs.
How do I prepare a defence to a legal claim?
Once you have engaged legal support and notified your insurer, your solicitor will begin crafting your defence. This process involves assessing the claim’s legal foundation and investigating the evidence.
A good defence is not about arguing everything, it is about focusing on the key points that matter most to the court. For example, was there actually a binding contract? Did the claimant themselves breach it first? Was performance prevented by factors outside your control?
Your solicitor will draft and file your defence within the court’s deadline, supported by documents and, where necessary, witness statements. If you believe the claimant owes you money or caused you loss, you might also file a counterclaim, which may potentially change the balance of any negotiations.
During this stage, accuracy and tone are very important. Courts expect factual, professional communication. Avoid emotional or accusatory language in correspondence; let your legal team handle responses formally and calmly.
Can I resolve a legal claim without going to court?
Commercial litigation can be expensive and time-consuming. Most commercial claims settle before reaching trial, often through Alternative Dispute Resolution (ADR) processes such as mediation or arbitration.
Mediation, in particular, can be a cost-effective and confidential way to resolve disputes. It involves both parties meeting (virtually or in person) with a neutral mediator who helps guide discussions toward a mutually acceptable settlement. It does not decide who is right or wrong, it helps with finding a solution that could avoid months of disruption in going down the route of litigation.
Other routes include arbitration (a private process similar to court but faster and often chosen where confidentiality matters) and negotiation between solicitors. Courts actively encourage settlement at every stage, and failing to consider ADR can even affect how legal costs are awarded later.
Settling early is not a sign of weakness; it is often a smart commercial move. The right settlement can save time, preserve relationships and protect your company’s reputation.
What will happen if the claim goes to court?
If the claim has to go to court, your solicitor will guide you through each stage, from filing the defence and exchanging evidence to preparing witness statements and attending hearings.
The court will issue directions outlining what needs to happen and when: disclosure of documents, witness evidence, and potentially ordering the arrangement of expert reports. It is important to note that keeping to these deadlines is non-negotiable.
It is also worth remembering that even at this point, a settlement remains possible. In fact, most cases that reach the courtroom corridor still settle on the day or shortly before trial.
If the trial does proceed, the judge will decide whether the claim succeeds or is dismissed, or they might make a split ruling (where both sides succeed partly). Depending on the outcome, the court may also award costs, which typically means that the losing party pays a proportion of the winner’s legal fees.
How do I manage the impact of a legal claim on my business?
Defending a claim is not just a legal issue, it is an operational one. Senior leaders must balance ongoing litigation with day-to-day performance, cash flow and team morale.
The key is early containment. Treat the claim like a project: assign responsibility to designated individuals, track key dates and make sure you document every development. Communicate internally on a need-to-know basis to avoid panic or rumours, and brief your board early with clear, factual updates.
If you have investors or clients who might be affected, work with your solicitor and PR advisers to craft consistent external messaging. Confidentiality is important, but silence can sometimes fuel speculation. A short, neutral statement confirming that “the matter is being handled through the appropriate channels” is often sufficient.
What are the possible outcomes of a claim?
Every case ends one of a few ways:
- The claim is withdrawn or settled before trial.
- The court dismisses it and may award you costs.
- The claimant wins, and you’re ordered to pay damages or perform a specific act.
If a judgment is made against your business, it does not have to be the end of the story. Your solicitor can advise on appeal prospects or look into negotiating payment terms to protect your company’s cash flow.
It is also worth adding that learning from the experience, reviewing what triggered the dispute and considering how to reduce similar risks in the future can all benefit your business in the long run.
How can I avoid future claims against my business?
Most disputes stem from unclear expectations or poor documentation. Strengthening your business foundations now can prevent another claim from arising, and you can do that by focusing on the following:
- Clear contracts: Define responsibilities, deliverables and payment terms precisely. Ambiguity is fertile ground for conflict.
- Record keeping: Keep consistent records of correspondence, project milestones and client approvals.
- Insurance: Review your policies annually to ensure they still match your activities and risk profile.
- Training: Equip staff, especially client-facing teams, to spot potential disputes early and escalate them promptly.
- Proactive legal input: Involve lawyers before problems escalate. Taking early advice is almost always cheaper than litigation.
Summary
There may be a temptation to try to deal with a claim yourself, but there is a real risk in doing so. For example, you may unwittingly say things that could ultimately damage your chances of successfully defending the claim.
Our team of business dispute solicitors can review a claim made against you and help you draft a response to a letter that threatens court proceedings. We can also assist with alternative dispute resolution options and dispute the claim in court if necessary.
