AVOIDING AND MITIGATING COMMERCIAL DISPUTES
Every business agreement, no matter how mutually beneficial it may seem to the parties involved, carries the potential for dispute. Even the most prosperous relationships can be derailed at any time by problems, differences of opinion or disagreements.
A commercial dispute is often an unwelcome distraction for a business, diverting valuable time and resources away from profitable activities. Furthermore, if it leads to court action, it can be an embarrassing and costly experience. Litigation, as a public process, can cause financial and reputational damage. “Having to engage in these disputes leads to both hard and soft costs,” says Donald McGarvey, a partner at McLennan Ross LLP. “The legal expense is one aspect but the soft costs can be equally draining on a corporation, as its personnel have to devote time and energy to the dispute rather than engaging in ‘revenue generating’ activities or furthering the interests of the business in a positive way.
“Reputationally, the odd dispute is not unusual today but when a business has multiple disputes, its lenders and others it relies on will see this as a red flag and become wary of doing business with a serial litigant,” he adds.
Of course, there are many ways to manage and resolve disputes. Rather than litigation, parties may opt for arbitration, mediation or other forms of alternative dispute resolution (ADR). But the best way to manage disputes is perhaps to avoid them completely, if possible.
Oct-Dec 2020 issue
Richard Summerfield