21 July 2006
Litigation - preparing for Battle!
No one wants to get involved in court disputes, but sometimes they are just unavoidable. Spotting a developing problem is not always easy. Each business will have its own classic warning signs that things are going wrong. Jo Pennycook offers some simple steps you can take to ensure that when problems do arise you are in the best position to tackle them.
- Know who you are dealing with. Is your customer or supplier a lone individual, a representative of a partnership or the front man for a limited company. It is important to get these details right from the outset. This will help you to credit manage and limit your own exposure. If you are dealing with a limited company it is worthwhile investing in a company search to make sure that you have up to date details of the company status, address, whether its accounts are up to date etc.
- Do business on your terms. Very often the first paperwork contact with a new customer or supplier is when you send or receive an invoice. Printed on the back will be a very full set of Terms of Business. If things go wrong you will want to rely upon these terms to resolve the dispute. You will not be able to! Terms of Business must be made available to the customer or supplier at the time the contract is made. That is much earlier than the invoicing stage (which is routinely during or at the end of the contractual relationship). Make sure that you make your Terms of Business available at the earliest opportunity and ensure that all contracts are governed by them.
- Do a credit check. If you are dealing with someone for the first time or are heavily exposed within one contract make sure that “the other side” can meet their obligations. Various organisations now offer credit search facilities and Companies House holds some useful information about limited companies.
- Make good records. This is essential for when things go wrong. Make sure that the terms of the contract are clear and that each party knows exactly what the other is to do. If there are changes to the contract record these in writing. This may seem bureaucratic when everything is going well, but it is invaluable in the future if a dispute arises over exactly what was agreed. If the relationship starts to break down again keep careful notes and records of conversations which you have. Keep emails for future reference. If you are having a meeting make sure that is noted in your diary and keep a note of what was discussed and/or agreed.
If you can incorporate each of these steps into your standard practices then they will become automatic. Make sure that your employees are briefed to follow this best practice. This is particularly important at the pre-contract stage.
- Keep good records. Once you have exemplary records, make sure you keep them! A contractual claim can be brought against you as long as six years after the contract has been completed. You may have a good claim or indeed Defence to a claim made against you but the difficulty is always proving it.
- Get advice early. If you find yourself becoming increasingly embroiled in a dispute it may be prudent to seek early advice. Getting a clear assessment of your legal position can help in resolving matters without the need to resort to court action. Often seeking advice only once the Claim Form has been received is too late to enable those advising you to do anything other than “fire fight”.