5 top tips about business disputes, from a business solicitor
It can be stressful when you find yourself involved in a business dispute, especially if you’re a partnership or SME. As business solicitors, we’ve resolved all sorts of business disputes.
Here are some of the self-help measures you can take to avoid business disputes in the first place.
Draw up proper agreements
A small business is often set up with friends or family, where everyone knows each other. When you fall out with a partner, director or shareholder, this leads to all sorts of complications.
Getting the relationships properly documented in a formal partnership or shareholder’s agreement, and it helps take the emotion out of the dispute. Rather than one person’s word against another, whatever is in writing usually applies.
Do your due diligence
Sometimes, the person who briefs you to do the job isn’t the decision-maker or budget-holder. This can lead to problems later on, if the budget-holder disagrees with the brief, or decides not to pay.
When you take on a new client:
- Find out whether they are a sole trader, partnership, LLP or limited company
- If a limited company, search their details at Companies House (it’s free)
- Search them on credit reference agencies such as Experian or CreditSafe
- Consider setting a credit limit
- Consider obtaining a personal guarantee from the director
Large UK companies and LLPs now have a duty to report on their payment policies, practices and procedures twice-yearly – this means you can assess their standard payment terms and discover how often they vary them. Check this data to improve your negotiating power.
Negotiate terms at the outset
Don’t send your T&Cs with the invoice, because at that stage they won’t protect you. They need to be discussed and agreed at the start of the contract.
Often, the work is urgent, and it’s tempting to commence anyway because you don’t want to lose the business – but this can be a dangerous decision.
Time spent discussing these issues in advance will save misunderstandings and tears at a later date.
- Understand your client’s purchase process, such as obtaining a PO number before you start
- Review your T&Cs regularly, especially in light of legislative changes such as GDPR
Avoid the ‘battle of the forms’
Often the question arises about whose T&Cs prevail – yours, or your client’s. If they are a large entity, they are likely to have their own T&Cs, and will try to insist that theirs apply.
It all comes down to strength of bargaining position, and trying to negotiate T&Cs with a PLC is likely to end in failure.
When T&Cs are passing to and fro, the court will ask: “Whose were the last to be communicated?” The most recent document will override any others. This applies even if your document arrived with a junior who didn’t understand what it was and filed it away without passing it on to the person in power. Because it was not rejected, it was accepted ‘by silence’ and a continued relationship.
Incentivise prompt payment
When we draft T&Cs for our clients, we include clauses to protect you. For example, we define the payment period for your invoices. Perhaps we’d include a discount for early payment (the carrot), or a penalty for late payment (the stick).
If you tell clients in advance, the Late Payment of Commercial Debts Regulations 2013 allow you to charge interest at 8% above bank base rate, plus £40 for a debt under £1,000 or £70 for a debt up to £10,000, and £100 over that, plus debt collection costs.
If a client owes you money, keep making a fuss. It’s common that whoever shouts loudest gets paid first. If you’re still stuck we can help.
Those are just a few of the business disputes we commonly help with. If you’re looking for a business solicitor, please call us on 020 7467 3980 for an initial chat.