Six ways to avoid contract disputes

According to research, 95% of business purchasing decisions are made subconsciously with emotion. Therefore, it goes without saying that the last thing most of us are thinking about is what will happen if something goes wrong with that transaction.

If you have a business contract dispute the first question will always be,’ do you have a contract?’ And, most of the time the answer will be yes because this is what we have been advised to do. From there things can go one of two ways: your contract helps your case, or it isn’t beneficial to you.

Unfortunately, more often than not contracts end up hindering the resolution of disputes because no-one thought they’d actually end up in a contract dispute, so they weren’t too careful with the terms of the contract when they signed it. The good news is, prevention is better than cure and you can do something about the contract terms before you sign, which may help you avoid a dispute later on.

Read the terms

This may sound obvious, but how many of us just sign up to contracts without reading because it’s easier or we want what the supplier is selling to us. We’ve all done it, from little things like ‘I want this phone contract, so I’ll just sign’ to ‘these are their standard terms so I guess I’ll just have to sign them if I want the goods’.

Being aware in advance what your rights and obligations are under the contract can help you avoid the pitfalls of breaching the contract later, or signing up to contracts which bind you into terms you do not want, for example contracts that are too long or have inbuilt fees for extras that you didn’t need. Not to mention that knowing your rights means knowing when to enforce them against the other party too.

Negotiate the terms

Where possible, negotiate the terms. As a business you will have more clout in changing the terms and negotiating a better deal than as an individual consumer. This is particularly true on larger contracts where the parties have more involved obligations to perform than in a standard supply contract for basic generic goods.

Check the term length

One of the most common causes of contract disputes is when parties aren’t aware of how long the contract will last for and find out too late that they are tied into a long-term arrangement. A key clause to look out for is automatic renewal, which catches out many businesses that think they are signing up to a short-term contract which then continues to renew automatically extending the contract indefinitely unless specific action is taken. If you don’t catch the automatic renewal provision in time, you can find yourself in for the long-haul or risk a contract dispute claim.

Know how to terminate before you sign

This may seem simple, but termination provisions can be quite complex and may only allow parties to terminate in very specific sets of circumstances. For example, you may only be able to terminate after the initial five-year term has expired and even then only by giving 30 days’ notice prior to the anniversary of the renewal date. If you miss the date to give notice, then you could be tied into the contract for another five years, if it automatically renews for the same length each time. This example may sound bizarre and unfair, but it is a perfectly valid and enforceable termination clause – make sure you’re not caught out.

Another key consideration with termination clauses is to look at the reasons you may terminate. For example, some contracts only allow one party the right to terminate, or only allow termination if one of the parties becomes insolvent. In those cases, if you are just unhappy with the costs you are paying under a contract or simply want to move on, that may not be enough to allow you to terminate.

Know the consequences of termination

Most contracts will contain a provision for early termination fees and continuance of accrued rights under the contract. Make sure you check that you will not be penalised for terminating the contract early and that you are not stuck with on-going obligations post termination.

Get the right support

Having a written contract for any business relationship is still the best advice, but the key is to have the right contract for your business and your interests to reduce the risk of needing contract dispute resolution further down the line. Know what you are signing and negotiate the terms to work for you, not against you. No-one wants to consider at the start of a relationship, business or otherwise, what could go wrong but thinking about it at the beginning makes contract disputes much easier to deal with later and if in doubt ask for help.

Contract dispute resolution advice

If you need contract dispute advice, our team of experienced dispute resolution lawyers based in Maidstone and Canterbury are able to advise you on your contract, its terms, how the terms apply to your situation and how to resolve your contractual dispute with the other parties. Alternatively, if you need advice setting up a commercial contract, our experienced commercial team are also available to help. To get in touch, please fill out our contact form or alternatively you can call us on 01622 690691.

This content is correct at time of publication