How to Prevent a Commercial Dispute

Disputes can be extremely disruptive and damaging for any business. However, there are steps you can take to prevent a dispute from happening in the first place. Most importantly, by investing in a well-drafted written commercial contract. This article will explore key practical and commercial law tips for business owners to help prevent disputes with their customers.

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1. Do Due Diligence on Your Customers

It is always tempting for businesses to want to grow their customer base as fast as possible. However, it is best to take your time when taking on new customers. Make sure you carefully research all potential new customers.

For example, consider examining the following:

• whether the customers appear to be professional and have established businesses;
• a customer’s creditworthiness and if you feel they will be able to pay their bills; and
• online reviews and websites to determine if they look like a respectable customer. Having a customer who is the right fit can be critical for long-term business relationship success.

2. Have a Robust Written Commercial Contract

If you are happy with your due diligence, you should ensure you and the customer sign a robust written contract.

Customer disputes can occur for several reasons in business. For example, a customer may be unhappy because they feel you:

• have not delivered products or services on time;
• there are defects or problems with the products or services received; or
• have misused their information or breached data protection laws. 

If you do not use a written contract, you could expose your business to high risk and various problems. For example, customers may misunderstand what you have agreed to deliver and complain about your products or services.

You should work with an experienced commercial lawyer to draft a contract that is tailored to your business – this investment is small compared to the cost of what may happen if things go wrong.

Benefits of a Commercial Contract

The contract will help prevent a commercial dispute in several ways.

1. A clear written contract will document precisely what products or services you are providing and help avoid mismatched expectations from customers.
2. A written contract can give you specific time periods to fix contract breaches. For example, if you cannot deliver a specific obligation on time, you can include a clause giving you a grace period to remedy your breach of that obligation.
3. A written contract can set out a clear way to resolve problems with an informal dispute resolution procedure. For example, well-drafted contracts may specify that the parties should first discuss disputes informally via alternative dispute resolution (e.g. through discussion or negotiation). The parties may need to follow the procedure in the contract before they can take more formal legal action (such as litigation in the courts). Therefore, customer problems can be quickly resolved before escalating. 
4. A written contract can limit your liability. For example, you can stipulate that you will not be liable to the customer for particular losses or damage they suffer if you breach the contract. A limitation of liability clause in your contract may deter customers from bringing a dispute if you can show that the customer agreed you would not be liable for certain problem issues. 

It is always worth working with a specialist commercial contracts lawyer at an early stage to make sure your written business contract protects you as far as possible. This will also give you comfort when trading.

3. Keep Records of Customer Commitments

It can be easy to lose track of things in business, particularly when things get busy. However, having a clear audit trail and records throughout a commercial relationship will greatly favour you in the long term.

For example, consider the following situations:

1. Document all your communications and actions under a customer contract. For example, if you have delivered a big order under a customer agreement to a customer’s premises, ensure you have evidence of the delivery.
2. If you have agreed to very specific delivery dates with your customers – make sure you note such dates and tell all relevant staff involved to document those dates to make sure you can make the deliveries as promised. 
3. If you have agreed on something with the customer over the phone, record it so you remember your commitments.
4. If your customer misses a payment, document your attempts at chasing the payment – this could serve as vital evidence later down the line if the problem escalates.

By having clear records and documentation, you will be well-placed to monitor your contractual commitments and help prevent a commercial dispute from arising.

Key Takeaways

There are key steps your business can take to prevent a dispute from arising. For example, investing in a well-drafted commercial contract to protect your business, doing due diligence before taking on new customers, and ensuring you keep clear records throughout your contractual relationships. 

If you need help protecting your business from legal risk, our experienced disputes lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.