Summer 2010 Business Disputes

How to avoid business disputes

Business disputes can be very expensive in terms of taking up your management time and the direct costs involved, such as legal fees. There are steps which you can take to help protect your business from having disputes;-

1. The first step to take is to make sure that your own business details are correct. This might sound obvious but it can because serious problems if all of your documentation does not, for example, have the correct business name, address, VAT number etc upon it.
If you are a limited company it is absolutely essential that the correct name of your limited company is upon all of your documentation, even if you use a trading name. If you have a trading name then you still need to make it absolutely clear that that name is a trading name of the limited company and set out the full name, address and registered number of the limited company. If you do not do so, then you provide the other party to a dispute with a potential defence.
For example, did you know that if your cheque book does not have the correct limited company name upon it, then the person signing the cheque, normally a director, can be held personally liable for any debt to which that cheque relates? Companies sometimes have cheque books in their trading name, not the limited company name. I have been told that it is the client's bank which has insisted upon the name that appears on the cheque book. The bank has no right to do so. You must dictate to the bank that the correct business name appears upon the cheque book.
There is no point operating your business through the medium of a limited company, which should grant to you the protection of limited liability, if you then give away that protection so easily.

2.  Make sure that you know who you are dealing with in any business relationship. You may think that you know who your business customers and suppliers are, but our experience shows us that in most disputes we work to resolve, our clients do not always know the correct identity of the people or business with whom they are dealing. Again, this provides the other parties to a dispute with potential defenses which at best can lead to a delay in pursuing a claim or resolving a dispute and at worst can lead to the failure of a claim. Unfortunately, it is common for businesses that are not averse to avoiding their business responsibilities, to run several limited companies with similar names within one group. Typically, they will interchange these company names confusing the correct contractual relationship. You therefore need to ensure that you obtain the full details of the business with which you are dealing. If it is a limited company, you want the full company details and, if you have not dealt with the customer before, then you ought to ask for a personal guarantee from one or more of the directors.

3.  Make sure that all your dealings are in writing or confirmed in writing. This will protect you and leave less room for doubt in the future. You should have properly drafted contracts, but remember that you need to ensure that your contract or terms and conditions of trading are incorporated into the agreement to provide goods and / or services to your customer. Traditionally, many businesses have attached their terms and conditions to their invoice. This however is too late. The contract has already been agreed when an order is placed by your customer and accepted by you. Therefore your terms and conditions need to be attached to any pre-contract correspondence such as a quotation. If you do have a dispute with a customer, then the courts will usually prefer written evidence to oral evidence.

4. Make sure that you make and keep notes of any conversations relating to disputes. These may prove invaluable in the future if you need evidence to help resolve a problem or disagreement. After being involved in a dispute, one of our long standing clients has introduced a mantra of "always make a contemporaneous note" to all their staff.

If you need help in relation to any of the issues raised in this article please let us know as we can prepare your contracts and if you do have a dispute, we can advise on how best to resolve a dispute and, if the disputes escalate, we can represent you.