Legal considerations
Contract enforcement and termination
Good contractual dispute mechanisms can support ongoing commercial relationships and help parties to reach an agreement without the need to go to court. For more information about contract management, follow this link.
• Check your contract terms and consider whether breach of a contract could give rise to liabilities. Review contracts with key customers and suppliers to understand liability in the event of supply shortages. Determine exposure by identifying current and buffer inventory, building transparency within the supply chain and short-term action plans. Try to avoid ‘breach of contract’ accusations.
• Force majeure clauses may protect you in the event that circumstances beyond your control prevent you from fulfilling your contractual obligations. They may also provide protection to the other party. Review your contracts and local law to see where liabilities reside and consider introducing or revising force majeure clauses to minimise your liability where possible. The nature of these clauses limits their invocation to events that could not reasonably be foreseen: they are not intended to mitigate risks of which you should reasonably be aware.
• Consider legal advice to ensure possible claims are mitigated. Understanding the risks and potential scope of your liabilities within an agreement helps to avoid unexpected claims in the future.
Negotiation, business disputes and conflict
Disputes happen from time to time in every business. Some disputes can cause you significant damage, such as increasing costs or taking up a lot of your time. Resolving disputes in an efficient manner should be a priority for every business.
You can resolve disputes verbally, in writing (such as writing a letter of complaint) or by more formal procedures. Try to understand the nature of dispute and refine the issues in order to take the action that is most appropriate. It is often advisable to document any verbal agreement in writing.
If you believe you have a conflict in your hands, try to follow these steps:
• If you have a written agreement, read it carefully to understand your dispute resolution clauses.
• Understand the mechanisms agreed for making formal notifications to your contractual counterparty.
• Understand the time you have to reply to a claim or to make a claim.
• Consider that email communications and written records may be used as evidence in case of litigation in court.
• Aim to resolve the dispute without litigation. Legal proceedings should be a last resort.
• Consider whether any alternative dispute resolution process such as mediation is available under your agreement. If not, explore whether the other party is open to mediation or other informal dispute resolutions.
If there are signs that the business relationship is breaking down, you should consider whether you need to take professional advice on your legal rights. This can help you have a more informed discussion with your business partner.
• In some cases, getting professional legal help is unavoidable. However, costly and lengthy legal disputes can sometimes be avoided through negotiations and other informal dispute resolution procedures.
• It is important to understand what the underlying interests are to reach a successful agreement. Interests, in the context of negotiating, are all the possible factors that can be used in the negotiation. Both sides have their own interests.
• People have different negotiation styles. Knowing the pros and cons of your own style and being able to modify it based on the people involved in the negotiation will help you significantly. Adopt an effective style that suits the person and situation – learn when each style is best to use. Use the negotiation planner as a powerful tool for ensuring you have considered the counterparty’s perspective when planning your negotiation approach, questions and messages.
• See tips for negotiation.
Negotiations do not always lead to a mutually agreed outcome. You have to know when to walk away and how to do it successfully so that the relationship can still be maintained.
• Plan – all good negotiators plan for a meeting. The key is planning in advance of the negotiation and ensuring you have clear limits concerning what you can and cannot accept. Consider how important it is to win the negotiation. This may help you decide how much you are prepared to concede in the negotiation and the point at which you may have to walk away without necessarily reaching agreement.
• Explore your options before the negotiation – think about all the options that will arise during the negotiation. For example: have clarity about your upper and lower limits as well as other options that you may want to offer the counterparty as part of the negotiation. Know what choices you can offer – these are likely to give the counterparty the opportunity not to lose face.
• End the negotiation – if you have explored all options and there is no resolution, then you need to work towards ending the meeting successfully.
• Follow-up – stick to the walk-away position you stated in the meeting. If you quickly change your position after the meeting, it sets a precedent and puts you in a weaker position in subsequent negotiations.
Mediation
Another effective process that can help you to resolve disputes is mediation.
Mediation is a form of negotiation that includes an independent third party who helps you in reaching an agreement with your counterparty. Mediation is generally recognised as an alternative dispute resolution process in many economies in which the EBRD invests, although aspects of the process vary in each country. In certain jurisdictions it is up to the parties to initiate mediation while in others attempting mediation is a prerequisite before applying to court.
There are many benefits to mediation:
• it is far less costly than court proceedings
• the process is flexible and can be tailored to your dispute
• mediators are usually specially trained and will help both sides understand each other
• if an agreement is found, it usually results in a signed settlement.
Mediation is most effective if started before any legal process. While it is less formal than court proceedings, you may still need legal advice before entering into mediation.
Learn about the mediation process in this guide.
