Six ways to avoid contract disputes

Most business relationships for the supply of goods or services will be governed by agreed terms set out in a written contract or agreed terms and conditions. Occasionally parties do not enter into a written contract and in these circumstances it can prove difficult to show what terms were agreed between the parties, in the event of a dispute.

It is, therefore, always sensible to ensure that any terms governing the relationship or business between the parties is set out in a written contract or a set of agreed terms and conditions. In these cases, that document will be the first port of call for parties to refer to either in the event of a dispute or just to understand their obligations to one another.

Read the terms

Assuming you have a contract in place, then (as obvious as it may sound) always ensure that you read, understand and agree to all of the terms being proposed at the outset.

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 auto-renewal provisions that you might not wish to agree.

Negotiate the terms

Where possible, negotiate the terms. As a business you may be better placed to negotiate more favourable terms than an individual consumer may have. This is particularly true on larger contracts where the parties have more involved obligations to perform than in a standard supply contract for goods or services.

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 longer term arrangement than they are happy with. A key clause to look out for is automatic renewal, which catches out many businesses as 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.

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 an initial term has expired and even then only by giving a set period of 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 set term.

Another key consideration with termination clauses is to look at the reasons each party may be allowed to terminate. For example, some contracts only allow one party the right to terminate, or only allow termination if one of the parties becomes insolvent.

Know the consequences of termination

Many 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 and always read the small print

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 support for a dispute 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.

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.

Listen to our future-proof your business podcast episode, where commercial litigation experts Michael Oatham, Lacie Kerner, and Paul Abdey discuss the critical importance of getting terms and conditions right for businesses. They cover several key topics, including, common pitfalls, key inclusions in terms and conditions as well as the necessity of including certain clauses into your terms and conditions.

This content is correct at time of publication