Think you’re getting into a commercial dispute?

Registered Providers have no desire to end up in a commercial dispute, but the fact of the matter is that they do arise and the manner in which a dispute is approached from the outset can mitigate the risk (and cost) to the organisation. 

In our experience, there are some fundamental practical ‘tips’ that any organisation should adopt when faced with a developing commercial dispute to ensure that the dispute is approached on the firmest of footings. 

1. Know your contract

It sounds obvious but, assuming you have written contract terms, read them closely and check what it says about the issues you are experiencing and the dispute resolution process (many contracts will set out how the parties are obliged to seek to resolve disputes to prevent matters escalating).

Unfortunately, in our experience, many organisations develop relationships with providers of services without entering into formal contracts. As such, if you do not have an agreed written contract, it is likely that the ‘terms’ of the agreement will have been agreed in a different form i.e. by telephone or face to face discussions or by email. As such, it is important to ensure that you seek out any attendance notes and emails (or other written correspondence) that may provide insight into the terms that have been agreed.

2. Follow the dispute resolution procedure

If your contract has a Dispute Resolution Procedure, ensure that you follow it. This might mean completing a series of escalation meetings before you can, for example, refer the matter to mediation or to court proceedings. Some contracts require a notice of dispute to be prepared which we could help to draft. Normally a contract would not preclude you taking urgent legal action (such as getting a court injunction) if needed.

Dispute resolution clauses are often drafted to mitigate the risks of disputes escalating unnecessarily and enabling parties to resolve minor differences to enable the wider contractual relationship to continue. However, on occasions, the nature of the breach is such that an ongoing relationship is not possible but it remains critical that both parties continue to ‘work through’ the dispute resolution clause.

3. Don’t act impulsively

There are some circumstances where it would be entirely appropriate to take swift, decisive action. For example, it might be that you have a situation that warrants seeking an injunction or terminating a contract on shorter or no notice.

However, try to be mindful of all the relevant circumstances, including potential arguments that the ‘other side’ could have. Take a measured approach where possible and always remember that ultimately this could end up with a Judge looking over the parties’ emails/communications. To that end…

4. Be careful with written communications (legal privilege may not apply)

There are many examples of people being caught out because they have committed certain comments to writing (including texts/emails) which may well be damaging to their legal position but are required to be disclosed during the course of court proceedings. Do not assume that legal privilege applies to your communications and documents, as privilege will only attach if strict requirements are met.

5. Duty to preserve relevant documents

As soon as you know that your organisation may become a party to litigation, you have a duty to preserve relevant documents (whether or not litigation has already started). At an early stage, before disclosure (the court process by which parties are obliged to exchange documents relevant to the dispute) is properly assessed, it is best to simply preserve all emails/messages sent and received and all documents created by particular individuals over a relevant period of time. It is important that you consider any data retention policies your organisation has to ensure that documents are not inadvertently destroyed pursuant to a relevant policy.  

If documents are altered, deleted, lost or destroyed as a result of your organisation not taking reasonable steps to preserve disclosable information, the Court could make inferences about your case and/or impose costly sanctions.

Consistent failure to enter into contractual terms, particularly for higher value contracts, can pose a significant risk to organisations. Failure to pass contracts through the usual signing and sealing authority process means that central teams don’t have clear oversight over what obligations you are bound by or the associated liabilities. Failure to comply with procurement requirements may also have implications for your ability to confirm that you comply with ‘all relevant law’ in your annual accounts.

Contract management is also increasingly on the radar of the Regulator of Social Housing, particularly where contracts relate to or affect customer-facing activity.

Ultimately, the ‘top tip’ is to ensure that you keep your contractual documents in order and seek legal advice either from your In-House Legal Team or your appointed external advisors as soon as you have concerns in respect of a contract or another contracting provider raises concerns with you. Receiving legal advice at the earliest opportunity will assist to manage any risk associated with the contract and ensure any procedural steps are complied with. 

Should you wish to discuss the content of this article further or would like specific advice in respect of a specific contract, please contact Emma Beynon.