Jay: Good morning everyone, and welcome to our webinar on handling client disputes through mediation and legal options. My name’s Jay, and I’m joined today by my co-host, Paula, who is a Practice Leader in our Disputes team.
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I’ll now pass over to Paula, who will run us through the agenda and get us started.
This guide outlines how to resolve commercial disputes.
Paula: Thanks, Jay. Today we’ll be discussing some common dispute scenarios you might have with clients, followed by early intervention strategies. We’ll then look at mediation as a first resort — rather than court being the last resort — and finally cover legal remedies and some strategic considerations. I’ll conclude with a short summary, and we’ll finish with a Q&A session.
When we look at the typical client disputes you might face, contract breaches are one of the most frequent. These arise when one party claims that the other hasn’t fulfilled their contractual obligations. In a business context, this might involve a client refusing to pay invoices, saying that the work doesn’t meet specifications, or claiming that delivery was late or of substandard quality.
These disputes often arise from ambiguous specifications or differing interpretations of what “satisfactory quality” means. Documentation is critical — look closely at what was briefed, the scope of the project, what’s been delivered, and all communications between the parties.
Payment disputes are also very common. Clients may withhold full or partial payment, citing alleged defects or dissatisfaction. Sometimes these are legitimate concerns, but other times they may simply reflect a client’s cash flow problems. Understanding the underlying issue will help determine your response strategy.
Scope conflicts are another common problem. These occur when there’s disagreement about what was included in the original agreement. Clients might expect additional work or modifications to be part of the base package, while you see them as additional services requiring extra payment. This highlights the importance of having a clear change control process in your contract.
Communication breakdowns often underpin other types of disputes. If clients feel ignored or misled, small issues can quickly escalate. Similarly, if businesses feel clients are being unreasonable or making unrealistic demands, the relationship can deteriorate fast.
There are usually early warning signs. Disputes rarely arise out of nowhere. Indicators include delayed payments, increasingly terse communications, excessive revision requests, or vague expressions of dissatisfaction. Ensuring your team is trained to spot these signs early can help you address issues before they escalate.
Early intervention is key. The most cost-effective disputes are those that never fully materialise. Recognising and addressing problems early prevents parties from becoming entrenched.
Proactive relationship management should be your first line of defence. Establish regular touchpoints with clients throughout the project — not just at milestones. Regular check-ins give clients the opportunity to raise concerns in a low-stakes environment. When clients feel heard and valued, minor issues can be resolved through simple conversation rather than formal dispute.
Create a feedback channel throughout the client journey. This might include progress reports, satisfaction surveys, or simply asking how things are going. When concerns emerge, they’ll appear as requests for adjustments rather than formal complaints.
Clear documentation practices can’t be overstated. From the outset, ensure contracts define the project scope, deliverables, and timelines. Many contracts omit timelines, which creates confusion. Manage expectations and include acceptance criteria, particularly for projects such as software development. Maintain records of all significant communications, decisions, and changes. If a client requests a variation, document it and confirm whether it’s within scope or requires an additional fee. This isn’t about bureaucracy — it’s about creating a shared understanding that prevents future disputes.
Address concerns immediately when they arise. If a client expresses dissatisfaction, even informally, take it seriously. Acknowledge their concern, investigate, and respond promptly. A genuine response to a small issue can prevent a major dispute later. Ignoring or dismissing concerns signals that you don’t take their needs seriously, which encourages escalation.
A conversational approach works well. Instead of taking a defensive stance, open a dialogue and ask questions to fully understand their perspective. Often, what clients complain about isn’t the real issue. For example, a complaint about an invoice might actually be about cash flow, or criticism of deliverables might mask disappointment about unmet expectations.
Commercial pragmatism should guide your early interventions. Offering a modest compromise, additional support, or a small discount can resolve issues that would otherwise consume significant time and money. This doesn’t mean giving in to unreasonable demands, but weighing the cost of being right against the value of maintaining the relationship and your reputation.
Have escalation protocols within your business. Assign a senior person to review significant concerns and ensure they’re handled effectively. Sometimes a new or senior perspective helps resolve issues and demonstrates commitment to finding a solution.
Mediation should be considered a first resort. If early intervention fails and positions become entrenched, mediation should be your next step before litigation. Many businesses only consider mediation after legal correspondence or even during litigation, but using it earlier can be far more advantageous.
Mediation is a voluntary, confidential process where an independent third party facilitates negotiations between the parties to reach a mutually acceptable resolution. Unlike litigation, outcomes are not imposed — the parties remain in control. Mediation typically takes days or weeks rather than the months or years of litigation, and costs a fraction of what litigation would. It can also preserve business relationships that court proceedings might destroy.
So, when should you propose mediation? Usually when direct negotiations have stalled but both parties still have something to gain from resolution. For example, where there’s a disagreement over contract interpretation or legitimate concerns about performance but no consensus on the remedy. Mediation is especially useful when emotional dynamics complicate what should be a rational commercial discussion.
Don’t wait too long to suggest mediation. When solicitors become heavily involved, positions harden and mediation becomes more difficult, though still valuable. Proposing it early signals your commitment to a reasonable resolution and can save time and cost.
To prepare for mediation, first select an appropriate mediator — ideally someone with relevant sector experience and professional accreditation. Legal qualifications can help, but commercial experience and mediation training are often more important.
Prepare a clear position statement outlining your perspective, the factual background, and what you want to achieve. Gather supporting documents but avoid overwhelming volumes — focus on key evidence. Decide in advance your ideal outcome, acceptable compromise, and walk-away point. Ensure whoever attends mediation has authority to make binding decisions. Bringing financial projections can also help demonstrate the cost of continuing the dispute versus settling.
Typically, mediation begins with a joint session where each party presents their position. The mediator then holds private sessions with each side to explore interests, test arguments, and convey settlement proposals. This continues until either an agreement is reached or the parties decide mediation won’t succeed.
Even if no resolution is reached on the day, mediation often leads to settlement soon afterwards. If agreement is reached, ensure it’s documented in a binding agreement. Throughout the process, stay open to compromise and creative solutions — something courts can’t easily offer. Mediators will challenge both sides, and this process often helps parties move toward closure.
When mediation isn’t successful or appropriate, you may need to consider litigation. At this point, strategic analysis is essential. Try to remove emotion from the decision and focus on commercial outcomes.
Start by assessing your legal position realistically. Consult an experienced solicitor who can evaluate your prospects honestly. A strong contract and clear documentation improve your chances, but consider not just whether you can win — think about what you can actually recover. Winning a case against an insolvent client achieves nothing, and you may not recover all your costs even if successful.
Conduct a cost-benefit analysis before proceeding. Legal costs can escalate quickly, sometimes exceeding the disputed sum. Even if you win, you’re unlikely to recover the full amount. Factor in management time spent on litigation — meetings, document reviews, witness preparation, and giving evidence — all of which detract from running your business.
Consider reputational impact. Lengthy litigation can deter potential clients regardless of the case’s merits. For smaller disputes (under £10,000), the small claims track offers a simplified and cost-effective process. For higher-value matters, check your contract for arbitration clauses, which can be faster than court proceedings.
Litigation involves document disclosure, witness statements, and possibly expert evidence, culminating in a trial if unresolved. Most cases settle before trial, but if you proceed, be prepared for it to be public unless exceptional circumstances apply — meaning details could be visible to competitors or clients.
Strategic settlement considerations are important. Cases often settle at pressure points — after claim forms or defences are filed, during disclosure when key documents emerge, or after witness statements. Be ready to engage in settlement discussions at any stage. Sometimes accepting less than the claim’s full value makes commercial sense when compared to ongoing costs and disruption.
For higher-value disputes, consider litigation funding options such as conditional fee arrangements, after-the-event insurance, or third-party funding. These can offset risks where strong prospects exist.
Every dispute offers lessons. Review and update your contract terms regularly to address ambiguities exposed by disputes. Ensure your contracts clearly define deliverables, acceptance criteria, payment terms, and variation procedures. Include a dispute resolution clause requiring good faith negotiation and mediation before litigation, and a limitation of liability clause to protect against disproportionate claims.
You might also include deposit requirements, staged payments, or retention of title clauses to protect against client insolvency. Structured onboarding processes help establish expectations early, clarifying variation procedures and communication channels for raising concerns.
Develop templates for key communications such as project initiation, change requests, and progress reports. These improve consistency and reduce administrative effort.
Client selection also matters — not every client is worth having. For significant engagements, consider credit checks, trust your instincts, and establish clear project governance with named contacts and escalation procedures.
Internally, ensure staff understand the importance of documentation, can recognise early warning signs, and know when to escalate issues. Create a culture that values client feedback as constructive rather than critical. Conduct regular relationship reviews with major clients to address concerns before they become disputes.
Jay: We’ll now move to your questions.
Paula: Thanks, Jay. We’ve had a few questions come through, so I’ll do my best to answer them now. Of course, feel free to get in touch with us afterwards if you have any further questions or would like to discuss your situation in more detail.
The first question we’ve received is: When is it better to offer a commercial compromise versus standing firm on your contractual position, and how do you make that judgment?
You really want to consider the relationship value beyond this particular transaction. Think about whether this is a client who provides recurring revenue, refers other business to you, or enhances your reputation by association. The cost of losing that relationship might actually exceed the disputed amount.
You should also evaluate the strength of your contract and evidence honestly. If your documents are ambiguous, incomplete, or open to interpretation, compromise might be the stronger commercial position. Litigation is expensive and outcomes can be uncertain.
Also consider the true cost of being right. Legal fees, management time, and stress all add up, not to mention the distraction from developing your business. Even for disputes worth £20,000 or £30,000, litigation costs can easily equal or exceed the claim value — and even if you win, you’re unlikely to recover all of your costs.
Finally, think about how your response might affect your reputation. In some industries, you might want to be seen as litigious, particularly where you’re protecting intellectual property or enforcing your rights. But in others, a reputation for being overly aggressive can harm your ability to win future work, even when you’re legally correct.
That said, if a client is being very unreasonable or setting a dangerous precedent, it may be important to stand firm. Otherwise, consider whether offering something small but valuable to the client could resolve the issue. For example, could you extend payment terms rather than offer a discount, or provide an additional service instead of a refund? Sometimes offering to fix or improve the work is more constructive than offering financial compensation.
The second question is: What should be in our contract terms to make disputes easier to manage?
There are a few important things you can do here. Firstly, include a tiered dispute resolution clause. This requires both parties to attempt negotiation for a specific period — typically a few weeks to a month — before proceeding to mediation, and then to litigation if necessary. Courts generally look favourably on parties who follow these kinds of procedures.
Secondly, make sure you have clear definitions within your contract, especially for deliverables or specifications. Avoid vague language like “satisfactory quality” unless you define what that means in your context or refer to an industry standard. Include technical specifications wherever possible to remove ambiguity about what constitutes acceptable delivery.
Lastly, set out clear variation procedures. Specify that any variations must be requested and agreed in writing, and that any cost implications must also be confirmed. This helps avoid scope disputes and makes it clear that work outside the agreed scope will be charged additionally.
Common mistakes include copying online templates without adapting them to your business and failing to ensure clients agree to your terms before work begins. This often happens when terms are buried on a website or invoice rather than signed or explicitly accepted. If you’ve been through a dispute, it’s a good opportunity to review your terms and ask a lawyer to strengthen them to minimise exposure going forward.
The last question we’ve had is: We’ve been working with a client for three months on a website development project. They approved every stage, but now, at final delivery, they’re saying it’s not what they wanted and they don’t want to pay the last invoice of £15,000. What should we do?
The first step is to gather all your documentation — any emails or written approvals, and anything showing the client’s satisfaction at earlier stages. This evidence demonstrates that they participated in and approved the development process.
Next, arrange a meeting as soon as possible — ideally face-to-face or via video — to understand their concerns. There may be an underlying issue such as a cash flow problem or internal pressure rather than dissatisfaction with the work itself. Understanding the real reason helps you decide on the right approach.
After the meeting, follow up in writing to summarise what was discussed and any commitments either side made. If legitimate issues exist, consider whether you can offer remedial work or adjustments, especially when weighed against the cost and risk of a formal dispute.
If that fails to resolve the issue, then you’re moving towards a more formal process — issuing a letter of claim, attempting mediation, and ultimately, litigation if necessary. These are the steps we discussed throughout today’s session.
Jay: Thank you, Paula. That was fantastic — really helpful answers.
It’s important to remember that the idea of legal work is to help you avoid getting into these kinds of disputes in the first place. Taking a proactive approach from the start can save you time, money, and stress down the line.
I’d strongly encourage everyone to take advantage of the complimentary legal health check we mentioned earlier. You can do that by adding your details in the survey at the end. It’s a great way for us to look at any concerns you have, discuss any questions we didn’t have time to answer today, and make sure you’re well-positioned to prevent these sorts of problems.
Also, while this webinar is free, we really value your feedback. It would be great if you could take 30 seconds to complete the short survey at the end so we can keep improving and continue providing useful sessions like this.
That’s all from us today. Thank you very much for joining, and we look forward to seeing you at our next webinar.
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