How to resolve a business dispute without going to court
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Posted: Wed 13th Mar 2024
Disputes and conflicts are not uncommon in business yet many owners automatically turn to the courts. But there is a better, easier and more effective way.
Most businesses will find themselves at the sharp end of a dispute at some stage or another.
According to Martin McTagueto, national chair of the Federation of Small Businesses: “Disputes cost small companies in England and Wales at least £11.6 billion each year. The LSB reports that around one-third (32%) of small businesses experience a legal issue annually."
Traditionally, the first call to action is to consult a solicitor. There is nothing wrong with this except if it’s not resolved immediately, then the world of litigation is complex and can be costly and time-consuming.
In addition, when a case finally gets to trial, a judge is more than likely to make a judgement that does not suit both parties. The judgement could be harsh on one party, whilst not giving the other side exactly what it wants.
In other words, the winning party may find its claim watered down and of course, there is always the issue of costs which can sometimes not turn out as expected.
Initially, a lawyer’s letter may be all it takes to ward off any unwarranted claim or conversely, to defend against such a position. This could hopefully be the end of the matter.
But what happens if the situation remains or even escalates?
Sometimes, resolving a dispute may seem impossible but a thoughtful and strategic approach will help.
As mentioned, disputes are not uncommon in business and can arise for many reasons, from disagreements over contract terms to supply issues or even partner or shareholder disputes.
Whatever the issue, it's important to approach the situation with a clear head and a willingness to engage in constructive dialogue.
This may require enlisting the help of a mediator to facilitate communication and help both parties find common ground.
Even if you’ve already instructed a lawyer, it’s not too late to consider alternative dispute resolution.
Mediation and the legal process
Courts nowadays are inundated with litigious claims and as a result, mediation also known as alternative dispute resolution (ADR) is highly encouraged to the point that at some stage during a trial, lawyers are duty-bound to offer it to their clients.
A court will very often take a dim view of a party who has turned down an attempt to resolve matters through open dialogue before arriving at court.
Unknown to many, as recently as July 2023, the Ministry of Justice confirmed that mediation would become compulsory for all money claims below £10,000. This came into effect on 4 October 2023, and whilst there are a few exceptions, it will more than likely cover most of the money claims brought about in a business dispute.
Mediation is a welcoming means for SMEs, given that it offers the parties involved the opportunity to resolve their dispute privately in a much less time-consuming yet, more cost-efficient way than proceeding to trial.
But how do you mediate?
First, it’s important during this process to remain calm and professional throughout, avoiding personal attacks or emotional outbursts that could escalate the situation further.
By working together to find a resolution, both parties can not only resolve their dispute but save an enormous amount of time, energy and cost.
Therefore, opening a line of communication is key.
Open communication
Begin by contacting the other party involved and asking for a meeting. This can be in person or by video link. A telephone call can work but meeting with the other side is much more powerful and effective. It’s always good to talk face-to-face, even if emotions are strained.
Sometimes disputes arise from misunderstandings that can often be clarified through open dialogue rather than written text, as personal feelings can often be misconstrued, escalating conflicts.
If you can do so, try and pre-arrange a suitable time to talk to the other party and make it clear that you would like to sit down for a constructive, non-confrontational meeting. Phoning them out of the blue is likely to catch them off guard and put them more on the defensive as they will not have had time to consider all their options.
It’s always a good idea to tell them in advance that you would like to better understand the situation from their point of view.
Define the issues
Clearly identify and define the specific issues that have caused the dispute. Understanding the root causes will help in finding a resolution. Very often a dispute can escalate into other issues, which may be minor but suddenly become important and part of the dispute.
Talks are likely to degenerate if issues, not directly related to the matters at hand, are dwelled upon.
Review contracts and agreements
Not all disputes begin with a formal agreement but if yours did, then now is the time to review it.
Agreements can be verbal, as well as written so even if you do not have a fully written and/or signed agreement, do not ignore what was agreed at the outset. Write down everything you can recall.
Look back at the things that led to the dispute and everything that was said and done before, during and after the event.
This will help substantiate your position. People very often forget things until they are reminded.
Make notes, this doesn’t necessarily need to be a long drawn-out set of documents, but anything you have such as a quote from a supplier, an offer from a partner or a promise from someone to do something, all adds strength to your open communications.
It’s never too late to do this. Setting out in writing exactly what you remember was agreed at the outset not only helps you in negotiation but also helps you to focus on the real issues. Even if it may seem too late, there is no harm in writing down everything that you recall from your initial discussions and verbal agreements.
Remember, as stated above, do not include other points that did not form part of the original agreement. This will only cause more problems and disagreements. By doing this, you will be identifying the original key issues and dispersing any anomalies.
If any form of contract was drawn up and the dispute involves a breach of that contract, review the relevant terms and conditions outlined in that agreement and check any notes taken at the time of the agreement.
This will help establish the legal context of the disagreement.
Make sure you have all of this to hand so that you can refer to them when your discussions begin.
Find common ground
Common ground is where both parties accept and agree that they are both in agreement with certain issues. By finding common ground, you are immediately establishing a bond or unity, where both sides can feel they have achieved something.
You are also eliminating some of the points, thereby narrowing down the issues so that your time can be better spent focusing on the main issues.
It’s not uncommon for two sides to be in agreement on a particular point whilst still quibbling, unaware that they are actually saying the same thing.
Negotiation
This is where collaborative issues come together and where both parties need to engage.
Although negotiation is not the role of a mediator, as a party involved in trying to find a resolution, you will find this helpful. Engage in direct negotiation with the other party. Be open to compromise and explore possible solutions that meet the interests of both parties.
Be adaptable and open to compromise. Negotiations often involve give-and-take and a flexible approach leading to creative solutions that satisfy both parties. Negotiations may take time, especially when dealing with complex issues. Patience is essential for working through challenges.
With mediation, always aim for a win-win outcome where both parties feel that they have gained value.
Propose solutions
Regardless of how solid you may feel your position is, stubbornness to an open mind can create a stalemate.
Go prepared with a potential solution or compromise. This proactive approach shows your commitment to resolving the dispute and may encourage the other party to do the same.
You never know, you may find you are offered something you didn’t expect!
It is important to listen and it is also good to propose solutions. At the end of the day, a prolonged and aggravated grievance is likely to do more damage than a well-thought-out solution and compromise.
Document everything
As well as making notes of previous discussions, make sure you now start to make a log of everything said and done during this time. Make a record of any attempts to speak to the other side, as well as any comments or discussions had.
This documentation can be crucial if the dispute escalates.
Enforce the resolution
So now you’ve made contact with the other side, arranged a meeting and conducted a satisfactory outcome. Hopefully, you are pleased with the agreement you’ve reached and so is the other party.
It’s important to remember in any settlement that unless both sides feel that any new agreement is fair, there could still be regret or remorse which may not be the best conclusion, especially in any future business relations or reputation.
If an agreement is reached, ensure that both parties fulfil their obligations promptly. This may involve drafting a formal settlement agreement which can then be lodged with the court in the form of a formal financial consent order.
Struggling to mediate? Seek out a professional
It could be that you and the other side are no longer on speaking terms or it may be that you do not feel confident in approaching them. You may even feel that there is no point as “they won’t listen anyway”.
If any of these apply, there is nothing wrong with turning to someone else to help. As mentioned, the majority of people immediately think of a lawyer, but there is another quicker and more cost-effective way, even if you have already sought legal advice.
Consider using a neutral third party to facilitate discussions and help both parties reach a mutually agreeable solution.
Mediators are specially trained to find a resolution even in the most complex situations. Mediation can be a powerful tool with around 80% to 90% being settled on the day and much of the remainder settling shortly thereafter.
Final thoughts
Remember that the specific steps you decide to take will depend on the nature of the dispute and the way it is handled.
Always look for a solution that works for both parties and ideally, one that will be lasting. It is unlikely that after a long-drawn-out and costly legal battle, both parties will be on talking terms. However, if mediation gives both parties a win-win scenario, it is possible that relations can be preserved/renewed. This not only means a satisfactory resolution through a mutually agreeable solution to the dispute but could also lead to a restored client-business relationship.
Even if you have made a claim and are working with a lawyer, your lawyer will welcome an effort by a mediator to find an early resolution.
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