Facing a dispute? When to seek legal advice

The importance of seeking early legal advice at the first sign of a business dispute cannot be stressed enough. Trying to resolve a dispute without legal advice from a business dispute solicitor is risky and almost always more expensive in the long run. It can also be counter-productive and mean that opportunities to pursue a claim or to resolve a dispute are lost.

If a dispute is not resolved a relationship between two parties can worsen or a person’s financial position could deteriorate. Other issues include that the time period for bringing a claim has expired or the ability to pursue the claim has been lost because the appropriate steps not having been taken. For example, where a person simply terminates a contract without seeking legal advice. As a result, there is likely to be an argument as to whether the termination was valid or not.

When you terminate a contract, we cannot change what has already gone on, but early legal advice can sometimes change the position and substantially improve or avoid litigation altogether. This is particularly the case where a party faces a substantial damages claim for having incorrectly terminated a contract. Our efforts are then focused on negotiating the best possible way out of litigation.

For example, we were recently involved in a matter where we advised upon and terminated a contract on behalf of a client. The matter subsequently proceeded to a five-day hearing in the Technology and Construction Court and the judge found that our client had properly terminated the contract. This is important when the costs for each party were in excess of £150,000 per side.

Another example which highlights the importance of seeking early legal advice rises where, following the acquisition of a business, the buyer discovers that the business is not as promised by the seller in the purchase agreement. This could be for any number of reasons such as inaccuracies in the company’s accounts or the business being subject to claims not notified prior to acquisition. 

It is important for purchasers to seek early advice as purchase agreements often only include short periods within which claims for breach of warranty must be brought. Giving notice of a claim often starts a second clock running such that any court proceedings for breach of warranty must be issued at court within a specified time frame. The ability to do so may be lost if a defective notice has been served in the first instance.

Another potential pitfall is that purchase agreements usually contain very specific provisions as to how warranty claims should be notified such as where and when notice is to be given and the specific information which must be included in the notice. Many disgruntled buyers have fallen foul of such provisions by not taking legal advice on timing/notification such that they have found that any chance of making a claim has been lost.

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 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 said:

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.