Facing a dispute? When to seek legal advice

Commercial disputes are a fact of life for many business owners. Even if they don’t end in litigation, issues such as breaches of contract, intellectual property theft, and non-payment of invoices can all have a serious impact on your business relationships and reputation, as well as diverting valuable time and resources from your commercial operations.  

In this article, our dispute resolution solicitors consider when, as a business owner, you should seek legal advice if you are faced with a business dispute.  

How do I know if I need legal advice? 

Some issues, such as the one-off late payment of an invoice, can often be resolved by contacting the other party directly and reminding them of their obligations. Although, even straightforward disputes can have far-reaching consequences if not handled correctly from the outset. For example, if a customer persistently pays your invoices late, you may be tempted to simply terminate your contract with them and move on. In some cases, though, doing so can constitute a breach of contract and give the other party the right to sue you. It’s important you thoroughly understand and correctly interpret the terms of the contract between you before taking any action. Dispute resolution lawyers can help you get to the heart of the matter quickly and provide commercially focused advice on your position, so you can be confident that nothing you do or say will harm your position. 

When is the best time to seek legal advice? 

The best time to seek legal advice is as soon as you become aware of a potential legal issue. While you may be able to successfully address minor issues, such as the late payment of an invoice, many other issues require legal advice.  

What are the risks of not seeking legal advice in a dispute? 

Attempting to resolve a dispute without legal support can be risky and may well be more expensive in the long run than seeking legal advice at the outset. Examples of specific risks include the following: 

Misunderstanding your position  

Many areas of law are complicated and even legal professionals may not fully understand the nuances of a practice area in which they do not specialise. Effective dispute resolution requires not only expertise in the relevant area of law, such as contract, professional negligence, or intellectual property, but also a thorough understanding of the procedural rules governing litigation. Trying to resolve a dispute when you do not fully understand your legal position or the Court’s expectations places you at risk of jeopardising your claim, facing adverse costs liabilities, and inadvertently doing something that results in you being sued by the other party or having your case struck out by the court. 

Our dispute resolution team comprises specialists in all areas of commercial law, including breach of contract, negligence, intellectual property, construction and engineering, and commercial property. They routinely work with businesses of all sizes to quickly and effectively resolve disputes and protect their commercial interests. As a result, you can be confident that their advice will be legally sound, commercially focused, and cost-efficient. 

Making inadvertent admissions 

Anything you say to the other side during the dispute may be used against you if the issue proceeds to trial, or by the other side to pressure you into settling on unfavourable terms. Taking legal advice early on in a dispute will avoid you making any inadvertent admissions, or saying anything else that harms your position. 

In certain situations, you can use the doctrine of ‘without prejudice’ to make concessions for the purposes of settling. Without prejudice correspondence cannot be referred to in Court, so the Judge will be unaware of it and cannot be swayed by it. Simply marking correspondence ‘without prejudice’ will not be enough to benefit from the protection; it is the content of the correspondence and context that is key.  

There may be cases in which the concessions you make can assist you in costs recovery at the end of the trial. Whilst the usual costs rule is ‘loser pays’, the Courts are keen to encourage settlement negotiations between the parties and will often give weight to a party’s conduct when deciding on the terms of the Costs order. Being able to show genuine attempts on your part to avoid litigation can encourage the Judge to look favourably on your costs liability, even if your case has been unsuccessful.  

Understanding the rules governing without prejudice communications is important to ensure you can speak openly without risking any concessions being held against you and ensuring you have the best chance of obtaining costs protection. Few non-lawyers possess the expertise and experience required to successfully navigate the without prejudice rules and getting it wrong can not only be costly but can also lead to expensive satellite litigation involving the parties arguing over the true nature of correspondence marked ‘without prejudice’.  

Failing to engage with ADR 

The parties to a dispute are expected to attempt to resolve their issue between themselves before they seek the Court’s assistance through litigation. Any party that unreasonably fails to do so can be penalised by the Court on costs, regardless of the outcome of the case.  

A series of ‘pre-action protocols’ govern the conduct of parties to a dispute ahead of issuing Court proceedings. Some types of cases, such as those relating to construction and engineering and professional negligence, are subject to specific pre-action protocols, whereas others must follow the steps detailed in the general pre- action protocol. The protocols aim to ensure that the parties exchange sufficient information about their positions early to facilitate effective settlement discussions. Failing to adhere to the pre-action protocol relevant to your claim can result in you facing sanctions, including having to pay additional costs. 

The Court expects parties to engage in alternative dispute resolution methods, such as mediation, at an early stage to settle their issues without recourse to proceedings. Not only do these methods often achieve positive results in a fraction of the time and for a fraction of the cost of litigation, but unreasonably refusing to attempt them can lead to sanctions, including increased costs liability.  

Dispute resolution solicitors can help you understand and comply with your duties under the applicable pre-action protocol and conduct your case in accordance with them. They will advise on the alternative dispute resolution methods appropriate in your case and guide you through the relevant procedure to ensure maximum costs protection. 

Do I need to collect evidence before I contact a lawyer? 

The more evidence you can provide, the quicker they will be able to assess the merits of your position and the more accurate their advice will be.  

The types of evidence you require to support your case will depend on the nature of the dispute.  

Examples of material that may help include the following: 

• Any contract between you and the other party. 

• Correspondence between you and the other party, both in relation to the dispute itself and your business relationship generally. 

• Copies of any purchase orders, invoices, and delivery notes. 

• Photographs. For example, if your claim relates to defective goods, photographs of those goods are key.   

Are there time limits for bringing a commercial claim?  

Yes, strict time limits apply to commercial claims. These time limits are known as ‘limitation periods’, and different limitation periods apply to different types of claims. For example, breach of contract claims must generally be brought within six years of the date of the breach. If you miss the time limit applicable to your claim, you will be prevented from pursuing it. It’s important to remember that your particular contract may contain time express limits that differ from those set out in statute, so you must act quickly to avoid missing your chance to pursue your claim. 

The importance of using alternative dispute resolution before parties become entrenched 

As a business, understanding the merits of your claim and your options going forward is key to achieving a timely and cost-effective resolution. Taking early advice on commercial mediation and other forms of dispute resolution means that we can raise it with the other side as soon as is appropriate before the parties become too entrenched in their positions, which can make settlement more difficult. 

Our senior dispute resolution solicitor Elizabeth Black comments: 

Taking legal advice and exploring alternative dispute resolution such as mediation at an early stage is crucial in saving businesses both time and money when faced with a dispute. It can help to preserve business relationships and prevent valuable management time being spent on protracted disputes.