The Covid-19 pandemic and surrounding economic uncertainty is likely to lead to a significant rise in disputes. Right from the outset, parties should be thinking about the steps they can take to protect their position. We set out here ten practical tips to assist in managing the early stages of a potential contractual dispute.
1. Be careful what you put in writing
Where possible, avoid making concessions and/or accepting fault (whether in writing or orally). Similarly, think carefully and take a step back before sending anything that you have written when angry or exasperated. Once you have committed something to writing it can be readily produced and used against you at a later date.
2. Silence is not golden
Do not stay silent on aspects of the other party’s conduct that you do not like – if you believe they have acted in breach of contract then raise this with them. Staying silent risks the other party relying on that silence as a waiver of your rights under the contract or an acceptance or affirmation of any breach of contract. Even if the contract includes ‘no waiver’ provisions (i.e. provisions which state that a party’s failure or delay to enforce its rights, following a breach of contract by the other party, does not result in the loss of those rights) they may not always provide complete protection.
3. Be clear what is (and is not) legally binding
During any negotiations, make clear what exactly the parties are legally bound to do or not do. For example, if you are agreeing to waive a particular breach of contract or make a temporary change to the contract, make very clear the parameters of that agreement, for example that it is one-off or time-limited.
4. Continue to comply with your own contractual obligations
Even if you believe that the other party is failing to comply with their obligations under the contract, where possible you should continue to comply with yours so as to avoid giving the counterparty the opportunity to allege that you are also in breach.
5. Check contractual notice provisions carefully
Check the notice provisions in the contract for any specific requirements for notifying the other party of a breach or dispute. These requirements might include: time limits for sending the notice; the contents of the notice; means of delivery; and addressees and addresses for delivery. Failure to follow these requirements could lead to the other party claiming that this constitutes a breach of contract and, depending on the specific provision and the circumstances, that you should now be prevented from bringing a claim.
6. Check the dispute resolution provisions
The contract should contain provisions which set out the processes the parties must follow to seek to resolve disputes. Those provisions may require the parties to enter into informal discussions and/or mediation before commencing formal proceedings such as litigation or arbitration.
7. Take steps to minimise your losses where possible
Under English law, a party will not be entitled to recover damages for loss that could have been avoided by taking reasonable steps. These steps could involve, for example, engaging a another party to conclude a project or selling rejected goods to a third party.
8. Keep records of losses suffered
As well as taking steps to minimise losses, you should also keep a record of the losses that have been suffered as a result of the other party’s conduct, including supporting evidence (for example, invoices and receipts). This will make it easier to demonstrate those losses at a later date.
9. Keep an eye on the time
Make sure that you don’t run out of time to bring a claim. This will involve checking any specific deadlines within the contract itself and also being alive to applicable statutory limitation periods. In breach of contract cases, the parties typically have six years from the date of the breach of contract in which to commence formal proceedings.
10. Trying to settle - “Without Prejudice” is your friend
If you are attempting to settle a dispute, make sure that any negotiations and/or offers are expressed as being “Without Prejudice.” This means that while you are willing to discuss settling the dispute, you do not admit or accept any of the arguments which the other party is putting forward and you do not waive any of your rights should settlement negotiations fail.
Additionally, if the dispute proceeds to formal proceedings, so long as the attempt to settle was genuine, communications marked “Without Prejudice” cannot be relied on by the other party to weaken your case.