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A contract is a legally binding agreement in which both parties to the commercial dispute must agree to the terms and carry out their obligations. Unfortunately, if you do not have a well-drafted contract in place for a business transaction, it could give rise to a business dispute. For example, if your business delivers goods to another company with a 30-day invoice payment and the other business fails to pay within 30 days.
Commercial disputes can arise without a contract in place because, for example, specific issues occur that are not thought out in advance and agreed upon as contract terms. You may worry about what actions are available to you without a signed contract. For example, whether to proceed with alternative dispute resolution or take legal action in a court case. This article will explain whether you can sue without a contract for your commercial dispute.
Can I Sue Without a Contract for My Commercial Dispute?
You will usually have a contract to do business with another company or sell goods or services to consumers. However, there may be instances where you do business with another company or person but do not have a contract in place. Perhaps you take the other party’s word for the business transaction, but later, they let you down.
Where you fall into a commercial dispute and no contract is in place, you can still try to sue the other party. Therefore, you may still start court litigation to resolve the commercial dispute. Alternatively, you may attempt alternative dispute proceedings (ADR), such as arbitration.
This guide outlines how to resolve commercial disputes.
However, whilst you may still be able to sue without a contract, there is a problematic issue you may have. This is proving that you did business in the first place and any money they may owe you. This is particularly true if you choose court proceedings to resolve the commercial dispute. Why? Because the burden of proof is on you as the claimant to prove what you argue.
In court litigation, a judge will decide if the other company owes you money or not by:
- what law applies to the situation;
- the evidence that you have;
- the proof that the other party (the defendant) provides; and
- the balance of probabilities.
What Evidence Can I Provide for My Commercial Dispute?
As pointed out earlier, it is possible to sue for your commercial dispute without a contract, but the major problem is that you have no contract as evidence of the dispute. However, there may be other things you can draw upon to prove the dispute.
Types of Evidence
For example, a bounced cheque is crucial evidence to prove that another company owes you money. Although cheques are less common than they used to be, hundreds of millions are still issued each year. Legally, a cheque is an individual or company saying they ‘promise to pay’, proving they owe you money. Similarly, if you had a direct debit with the other party and this bounced, it also proves they owe you money in the commercial dispute.
Although you may have no contract with another business in a commercial dispute, you will likely still issue them an invoice for the goods or services. This can also act as sufficient evidence for suing over a business disagreement.
Another potential piece of evidence to sue for your commercial dispute where no contract is in place include your actions before any court litigation. In court proceedings, a lawyer is a last resort for any commercial dispute, so usually, you will initially take formal methods to try to resolve it.
Sometimes, you draw up a contract and provide it to the other business, yet they do not sign it, meaning no contract exists. However, it could be evidence when suing if they acknowledge receipt of this. The reason is that a judge interpreted this as them agreeing to terms as they did this and did not provide alternative terms.
Although you may not have a written contract, you may have a verbal one. For example, if your business makes sales over the telephone, you may record these to provide evidence. Alternatively, another person may have heard the transaction take place. However, with the latter, they must be independent witnesses.
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Key Takeaways
A commercial contract is a legally binding agreement between you and the other party, such as another business. Where you have a contract in place, it can direct you both on what to do if specific issues arise. Therefore, you could avoid a commercial dispute if you have a well-drafted contract. You may still pursue commercial litigation to resolve the conflict when this occurs. However, the key issue you will face is being able to provide evidence on the dispute and any debt owed. There are, however, ways to do this, as discussed in this article.
For example, you can provide a bounced cheque as evidence of a ‘promise to pay’ before the court proceedings. Other evidence, for example, is to show that an unsigned contract exists and the other party raised no issues upon receipt.
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