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Effective Ways To Avoid Business Disputes

Effective Ways To Avoid Business Disputes

No-one likes surprises in business.  This is because the vast majority of them are not pleasant.  They usually take the form of something very unexpectedly failing.  This could be:

  • A supplier suddenly failing to deliver
  • A client failing to pay you on time
  • A key client unexpectedly leaving you mid-contract
  • A contract between two businesses (or even business partners) failing

All of these unpleasant surprises could place even a thriving business in danger.  In sorting out these situations, you might need to resort to a solicitor to help you with dispute resolution.  But could some of them have been avoided in the first place?

These things regularly happen in the world of business and can have serious consequences for your company.  Unfortunately, in the aftermath of the Brexit decision, they are even more likely to occur according to a business survey by the Institute of Directors:

  • Nearly two-thirds (64%) of IoD members think the result is negative for their business, against 23% who think it is positive (only 9% say it makes no difference)
  • 22% of IoD members are considering moving some of their operations outside of the UK; only 1% say they will bring operations back

We are in a period of high economic uncertainty and now is the time to protect your business from unexpected surprises and the need for legal dispute resolution services.

In this short article, you will discover easy ways to protect your business as far as possible from unexpected surprises and failures.  We will cover:

  • Five Takeaway Points
  • Dispute Resolution: When a Distribution Deal Went Wrong
  • How Did This Happen?
  • Avoid Dispute Resolution with Airtight Commercial Agreements
  • When to Review Your Commercial Agreements
  • Why Else?

Reading time: 4 minutes

Five Takeaway Points

The key points in the case study discussed below are:

  • Friendships and business relationships are an effective way to get a good win-win commercial deal for both parties.
  • Any commercial deals (including ones with friends) should always have an airtight contract in place before they start.
  • Things in business can change unexpectedly.  You need to stay alert for indicators that show changes are occurring or have occurred with the other business or in areas that might affect them.  In the below case study, our client would ideally have reviewed his contract after his supplier was taken over and sought legal advice immediately after the first breach.
  • You must review your commercial contracts when things change as they may no longer be fit for purpose.
  • Brexit has created considerable uncertainty in the economy and business community.  Now might be a good time to review your longer term contracts.

Dispute Resolution: When a Distribution Deal Went Wrong

Chris Else, Managing Partner at Else was recently called in by a client to help resolve a dispute with one of their long term suppliers.

Our client specialises in the provision of equipment to the leisure industry.  They had enjoyed a business relationship over 15 years with an equipment supplier who guaranteed to offer them the best rates on their machinery in exchange for the promotion of their products.  This was a simple distribution agreement in which our client marketed and sold the supplier’s equipment in exchange for preferential pricing.

This was a great deal for both companies and they both rapidly expanded.  Unfortunately, earlier this year, our client lost a major Government contract due to the supplier breaching their agreement.

The Government used our client on the basis that they had the sole distribution deal with the equipment supplier and guaranteed the best price for equipment.  In the middle of their 10-year contract, there was a requirement for the end user to obtain 3 quotes to demonstrate that our client remained the cheapest supplier of the specified equipment and thereby justifying their continued use.  Our client provided a quote but the end user received a cheaper quote for exactly the same equipment from a different supplier.

Our client was shocked by this and as a result lost his biggest contract.  The loss of this contract has shrunk his company back to where it was fifteen years ago.

How did this happen?

Fifteen years ago, the Directors of the two businesses had a good relationship and they agreed this lucrative distribution deal.  While a contract was put in place, this was not as airtight as it should have been and it did allow some wriggle room.

Over the intervening 15 years:

  • The supplier was taken over by a multi-national business.
  • The relationship between the two directors was obscured by the move and new management
  • The supplier decided that they no longer needed a distribution deal and wanted to sell directly themselves to increase their profits
  • There was an earlier breach of the contract when they had sold equipment to our client at a higher rate.  The supplier apologised for this.

The outcome of the case was:

  • Our client calculated the profit they would have made on the remaining term of the ten-year contract they had lost
  • Chris used his extensive legal expertise and negotiating power in the face of a large corporate legal team to recover 70% of our client’s lost profits (a significant sum).
  • Chris would have recovered 95% of the lost profits if the original contract had covered all the necessary technicalities.

Avoid Dispute Resolution with Airtight Commercial Agreements

Business owners, MDs and CEOs know from a commercial viewpoint what has been agreed with a supplier, partner or customer.  However, it can be difficult getting this agreement written so as to constitute an airtight commercial contract with no wriggle room for either side.

This is where an independent third party solicitor is vital.  They can ensure that both parties are happy with the contract and that it is securely locked down with no wriggle room in the future.  The contract should also cover what happens if the two parties fall out or if there is a significant change and a new deal needs to be negotiated.  This allows both parties to relax knowing:

  • They are far less likely to have unexpected surprises in the future and
  • If there is a major change, how they can move forward.

It is also vital to have processes in place and stay in good communication with your clients, partners and suppliers.  Some companies close their eyes and hope for the best rather than asking those difficult questions.  However, in the long term, it is always better to defuse any potential situations before they threaten your commercial agreement.

When to Review Your Commercial Agreements

You should review your commercial agreements when:

  • The other company makes management changes
  • The other business is struggling (whether supplier, client or partner)
  • You receive late payment from a client
  • In a distribution deal, the seller is not hitting their minimum number of sales
  • Your business is experiencing difficulties
  • There is a significant change in size in the other company.  Contracts that work for a small business, do not work with larger organisations.
  • There are significant changes in the economy which are likely to impact your business or theirs.  This prevents many unexpected surprises and can help guard you against the domino effect.

It is also worthwhile reviewing longer contracts (those lasting 10 years or longer) every five years.  This reminds you of what you have agreed.  Also, if things have changed, then you might want to consider if it is worth buying out of your existing contract and re-negotiating a new one.

Chris Else, Managing Partner at Else commented: “MDs and CEOs are aware of the need for an airtight contract before they start working with a partner, supplier or client.  However, when things change, they often forget to review the contract to see if it is still fit for purpose.  A contract which is airtight with a small business would not work if that company was taken over by a large corporation.  Equally, if key people leave then the business relationship can be lost and the commercial contract should be reviewed.

There is also some business uncertainty following the recent Brexit vote and most companies are sensibly reviewing their long-term contracts.”

Is now a good time for you to review your longer term contracts or maybe you want some assistance in putting a new airtight one in place?  If so, then we can help.

Why Else?

Else Solicitors is very experienced in commercial contracts and dispute resolution.  By knowing what can go wrong later down the line, we fully understand what needs to be put in place so you can avoid such complications.

You will discover that we are different to other law firms.  We will settle your dispute and look at other ways we can add value to your company.  This could include introducing you to new customers or suppliers in our extensive network or offering you some new insight into your market or your business.

Else Solicitors has an enviable reputation for always going the extra mile and offering a personal, jargon free service.  Your business is not only in trusted legal hands but will also benefit from our extensive business knowledge, experience and contacts.

If your company would like some legal help with contract disputes, disputes over the provision of goods and services, breach of contract, or withholding payment then we invite you to contact Chris Else, Managing Partner at Else Solicitors on 01283 526200 or at chris.else@elselaw.co.uk.

“From the initial consultation, through to selling my property, the Property team at Else Solicitors have been professional, proactive and most importantly have kept me updated at all times. Their attention to detail ensured that every aspect of the sale was meticulously handled, alleviating any concerns along the way. Else’s ability to explain complex legal concepts in a clear and concise manner was greatly appreciated and helped me feel confident in any decision making. I cannot thank the team enough for their hard work, professionalism, and dedication throughout this process. I would recommend Else Solicitors to anyone.”

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Chris & Alison Stephenson

“I was advised at a preliminary court hearing that I should engage with a solicitor for legal assistance on my court case. I researched Else solicitors and had an initial call to discuss my case, which I was impressed with. I engaged with their services and worked with Chris throughout the matter. He was impeccable with his communication and quick to respond. As a result of his hard word, Chris successfully resolved the matter through negotiation saving future legal fees and avoiding the need to attend the final court hearing. I would highly recommend Else’s services for future business legal requirements.”

Dispute Resolution Client

``I wish to express my sincere appreciation for the excellent service provided to me by Kathryn Caple and an Else Solicitors team. I could not have completed my father’s estate and his Will processing without their
kind help while I am leaving in USA.

Kathryn is one of the shining examples of professionalism, caring and knowledgeable person. She listened, advised and kept me informed throughout the process dealing with my father’s estate. I am very pleased with the quality, responsiveness and extensive legal expertise of Kathryn.

A massive thanks to Kathryn and Else Solicitors Team! I would highly recommend their service.

On my personal note, I really enjoyed working with Kathryn. I could not be more satisfied.”

Rakesh Mishra U.S.A.

``Thank you Kathryn for all that you have done to render an unpleasant process more palatable. I do appreciate the compassion you have shown throughout.”

Wills & Probate Client

``Thank you so much for all your help. You’ve really gone above and beyond and made this whole process much easier.”

Wills & Probate Client

``I would like to thank Kathryn for her support and guidance throughout this protracted procedure of settling the affairs of my relative. My family and I appreciated your endless patience”

Mr Terry Wills & Probate Client

``I used Else Solicitors recently to do my probate work, having had excellent service previously on some house sale matters. Kathryn Caple, their head of probate was exceptionally efficient and knowledgeable. I had total confidence in the expertise I was being provided and the work was completed in a very timely manner. Feedback was continuous and I was totally satisfied by the outcome``

Russell Jeans Probate Client

``We are very pleased with the service Else Solicitors provided for us. We had retentions that were overdue (circa £40K), the Main Contractor had missed the payment date on their Payment Certificate, when chased we were told that they couldn’t pay for another couple of months due to cashflow, we had been in similar situations before, having been given payment plans that weren’t met, and then companies go into liquidation.

I looked on the Internet and filled in Else Solicitors web enquiry form, A member of the team called me back and talked through the various options, which I took away to discuss internally with my business partner. We agreed the plan of action which Else's team executed swiftly and efficiently, dealing with all correspondence received from the Main Contractors Solicitors, our monies were received in our bank within 2 weeks.

Can’t recommend Else enough!``

Construction Client Construction - Retention Monies

``I would never hesitate in using their services again and in recommending them to other professionals.``

Angelica Duncan Director - Chameleon School of Construction

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Liz Strama CEO - HR Protected

``Smith Cooper work with a handpicked selection of law firms across the UK where our accountancy matters require expert legal advice. We refer specific corporate, litigation and insolvency cases to Else Solicitors because of their technical experience, flexible and professional approach and their efficient way of working. We have established close working relationships with the team at Else over a number of years.``

Dean Nelson Partner - Business Recovery & Insolvency - Smith Cooper

``I appreciate the attention I received and your professional service and whilst I don’t wish for a similar situation I would have no hesitation in using your services again.``

Debt Recovery Client

``Thank you Else Solicitors and in particular Laura Charles for another successful outcome this week in the recovery of our bad debt. We don’t get them often but it’s a huge relief and comfort to know we have your friendly but extremely professional firm always there ready to help with very little notice. It’s an absolute pleasure working with you and here’s to many more successful years. Thank you!``

Debt Recovery Client

``A massive thank you to Laura and the rest of the team at Else solicitors.
We had some issues retrieving monies owed from a previous contractor for the past 2 years, and the team really did go above and beyond.
From our point of view, it was money very well spent as within 2 weeks full payment was made by the contractor who previously had a very stern view of not paying.
Laura and her team battled many emails with the contractors solicitors, all of which was included in the price.
A massive thank you once again! Would highly recommend!``

Debt Recovery Client

``I would like to extend my thanks to Chris and the team at Else Solicitors for their support and guidance over my recent purchase of Ethical Property Partners England and Wales.
Chris and his team,have been professional and supportive throughout and where needed have been prompt in their responses, often at late notice.
I was really pleased with their approach to helping myself and my Business Partner Paulene navigate the pages and pages of contracts and break them down into plain English where needed!
I'm looking forward to them being able to help with the next step of sorting our Shareholder agreements!``

Amanda Jarvis-Doyle Ethical Property Partners (Property Consultant)

``We provide international shipping services to customers and following the non-payment of an invoice, we instructed Else Solicitors to seek recovery of this.

Proceedings were issued and the case proceeded to a final hearing. We cannot thank the team enough for the work put into this case as the final judgment was in our favour and we recovered the debt in full, plus a portion of our legal costs.

The Team explained each step of the process to ensure our understanding of the case and provided updates at every opportunity. We were very pleased with the final result and the support received on the run up to the hearing.

We would not hesitate to use their services again.``

Ian Hardie Sales Director at Smart Directions Limited.

``Laura and the team have become an excellent asset to our finance department over the last year. They have helped us recover debts in full from 2 particularly difficult payers that we had no hope of recovering ourselves! They make the process simple and easy to follow, and always have a quick, helpful reply when we need something clarified. I would recommend Else Law to anyone who needs additional help with pursuing uncooperative customers because so far they have a 100% success rate with us!``

Debt Recovery Client

``A huge thank you to Laura and Elselaw for assisting in recovering monies owed on a 12-month-old invoice. Even though our business is based in Australia, we were impressed how quickly they assisted with our enquiry and put us at ease given the international element to the litigation.

We would highly recommend any business based outside of the UK, who has a troublesome UK client, to consider using Else Solicitors (Laura!) to resolve their issue quickly and efficiently.”

John Morgan, Director of Forensic Instinct

“The Else Debt Recovery team have done an excellent job in keeping us organised and on track over the past 18 months and the Commercial Dispute Resolution teams input has been a great help in recent months, dealing with the more problematic situations, including collection of the largest debt by speaking directly with the MD and owner of the debtor company, taking the heat out of that situation”

Debt Recovery Client

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Wills and Probate Client

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Most of our debt recovery is done in house, however, we sometimes require Else to recover debts on outstanding invoices by one off buyers to the value of £500, resulting in Else recovering the money in full in less than 30 days.

Having a well-known reputable company in Else at the end of a phone is reassuring. We have found that since we have been using Else to recover debts, we have saved time, money and most importantly their expertise means that the debt is almost always recovered.

Else offer an outstanding service which we have used for over 5 years. We would thoroughly recommend their service without hesitation.``

Lisa Griffin Debt Recovery Client
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