<< Previous: Exiting or terminating the contract

1. Contracts should clearly indicate what happens if either party fails to perform their obligations. The clearer this is, the greater the parties’ incentive to avoid or mitigate non-performance. If the contract is silent, or vague, parties will be unable to make decisions preventing or mitigating risks they are responsible for. 

2. Communication is key to maintaining relations and fixing problems. It is not acceptable to present the other side with a fait accompli and a bill. Get both parties to agree there is an issue and work through the problem.

3. How you communicate your message sets the tone for how the dispute will be played out. Understand what the contract says about notices and adhere to the process closely. Nobody likes surprises involving bad news, so it is worth telling the named recipient of the notice that you are about to submit one, and asking for a meeting to discuss it. Often you may need to find a way to help the other party justify your claim internally in their organisation in order for them to be able to agree to it. They may also be up against a dispute with their insurer who might have to pay if you make your claim.

4. Ask yourself how much control you have over the resolution of the issue. Depending on factors such as head office intervention, how quickly you require the contracted work to progress or the need to recover cash means you may not be able to decide the path for the dispute yourself. Few people consider whether the other side is likely to respond with a counter-claim. So put some direct questions to your account team before sending a missile into your trading partner.

5. Include dispute escalation paths in your contract. These provide each management level the chance to resolve an issue in a pre-determined timescale before it moves up the organisation. Nobody wants to give their boss a problem, so there is an incentive for individuals to resolve the matter at their level.

6. Never terminate or threaten to do so without taking legal advice.

7. Relationships and reputations take years to establish. A mature, professional approach will help you achieve the best outcome. If your counterpart is being unreasonable, you need to move the dispute up a level. Once you get into formal dispute mode you have lost control