An Overview Of Business Litigation

“Litigation solves everything.” – Jon Cryer

Litigation in business is something that will always exist.

When business contracts are entered into, a relationship is formed between parties that like another relationship, can have its ups and downs. Businesses often find themselves in dispute with other businesses and / or individual consumers when something does not go according to plan.

Often, a contract will be entered into by the parties at the start of a business relationship. This will define the terms and conditions of the contract and their rights and obligations, as agreed in pre-contract discussions.

In certain circumstances, terms are broken by either one of the people/businesses that have signed the contract known as “parties” or sometimes both.

This is when a dispute will arise, as the party that hasn’t broken or “breached” the contract will seek a remedy to rectify the situation, in order to put them in the same position they had of been, had the breach not occurred.

Non-payment business litigation

When a breach of an ‘obligation to pay’ occurs, the breaching party will ordinarily be given an extension of time to pay and if they still fail to honour that obligation, the party who hasn’t breached the contract  will be likely to terminate the contract and sue for monies due, plus interest and any other losses they have suffered.

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Other areas of business litigation

Other contractual issues can arise additional to non-payment.

A party’s failure to perform an obligation to carry out a certain act i.e. manufacture a product by a certain date would be one example. If this failure has resulted in subsequent losses that could not be avoided, the non-breaching party could apply to the court to force that party to perform this specific obligation, and claim any losses they have suffered as a result of the contract not continuing.

Another example would be if a party to a contract is carrying out acts that constitute a breach of contract i.e. discussing the business relationship with third parties when there is a confidentiality clause, the non-defaulting party could apply to the court for an injunction to require that party to to stop doing it.

Taking action

Prior to the start or  “issue” of court proceedings, Alternative Dispute Resolution should be considered, such as Mediation and/or Arbitration. The relevant court rule pre-action protocols should be followed to try and reach an early settlement to the dispute. The aim of the pre-action protocols is to encourage an early exchange of information and evidence between the parties in order that they can fully understand each other’s case and thus assess the prospects of succeeding, if a claim is issued in court.

If a pre-action settlement is simply not possible before court proceedings are started, then the matter may need to be put before a Judge to provide an independent decision on the remedy sought.

Parties must involve the courts as a last resort with a view to saving costs and court resources.  Many business-individual contract disputes will be heard in the County Court however, more complex business-business disputes may be more suitable for the High Court, which has specialist divisions such as the Commercial Court and the Companies Court.

Prior to the start of a breach of contract claim, you must always consider whether you have brought the claim in time, in accordance with the Limitation Act 1980. This Act gives time scales in which different types of claim must be issued at Court to prevent them from being out of time. For example, in a claim for breach of contract, the action must be settled or court proceedings issued before the end of 6 years from the date the breach occurred. In addition, you must assess whether the UK courts have the power in law to handle the claim. This all depends on where the contract was entered into and the applicable governing law if stated in the contract.

Business litigation can often be a minefield and you have to be conscious at all stages of the correct action to be taken in order to best protect your legal and financial position, in order to reach the best possible outcome for you in the circumstances.

Litigation Flowchart

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Business Litigation flow chart

Business litigation can often be a minefield … be conscious of taking the correct action in order to best protect your legal and financial position and seek expert legal advice and assistance to prevent errors

Blunt advice on business litigation from Yorkshire Powerhouse
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