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It is common for there to be disagreements over a contract. There are countless reasons why partners fall out and it is unlikely that even the best contracts will cater for every possible eventuality, as people become entrenched in their positions and a “them and us” mindset develops. However, not every difference of opinion needs to trigger a dispute.

Companies that regularly make claims and embark on disputes are not managing their businesses well. It’s not a question of leaving cash on the table by not claiming, because it is unlikely you would recover the full value of a claim or your entire legal costs. In addition, the management overhead should not be underestimated. Can your key players be given a more productive pursuit?

Some sectors are more prone to disputes than others – the construction industry has been responsible for generating considerable case-law over the years due to its adversarial approach to contracting. Most construction projects are one-offs, never to be repeated, so many companies don’t think twice about submitting a claim at the end of a project.

Economic pressures can also have a bearing on a party’s motives. Disputes in long-term, high-value deals, such as IT services or business process outsourcing, are less common. These contracts have until recently been more balanced and equitable in terms of the power and obligations of the two parties. 

Also, no-one wants to fall out in year two of a 10-year deal and typically the returns in outsourcing are higher, allowing suppliers to absorb a certain amount of scope without needing to claim. That is not to say disputes do not occur; and when they do they can take years and millions of pounds to resolve. However, some sectors are able – or perhaps more willing – to find a more elegant solution to resolving disputes, which helps to preserve their trading relationships.

If you assume there is the potential for things to go wrong, you can make allowance for this in the contract. If your contracts set out some basic principles it should force the parties to manage their way through a problem (see basic principles for resolving problems/disputes).

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