Whether you are an agent or a principal, when a dispute gets serious, the first steps you take can have a profound impact on how the dispute unfolds and who will achieve the better outcome. Below are some of the important points that everyone should start thinking about as soon as dispute arises.
1. Be clear about your objective
Always remember: (1) disputes are unpredictable, (2) everyone involved will suffer some cost, and (3) most disputes end in compromise, not outright victories. Therefore, even if you think you have a watertight case, when formulating your objectives it is better to think in terms of a range of possible outcomes than one fixed outcome. Work out what your business can and cannot afford in terms of time and money, which problems it can and cannot tolerate, and make sure they are all accommodated. If the demands of your business do not fall within the range of realistic outcomes then you should probably rethink your approach to the dispute entirely.
2. Develop a strategy
Take time to think about any aspects that you might be able to turn to your advantage. For example, some opponents will be sensitive to costs, delays or reputational damage, whilst others will be dependent on preserving relationships with you or your allies. Less organised outfits are usually bad at producing reliable evidence to back up their case, possibly because they do not keep proper records or because their witnesses are unreliable. There possibilities are endless. Think about what applies to your particular case and work them into an overall strategy. And don’t forget to think about what can be used against you.
3. Remember the contract – and the Regulations
The starting point should always be to check what the contract between agent and principle says. Most contracts have clauses that govern duties, breaches, damages (including whether an agent is entitled to compensation or an indemnity), termination, notice periods and the mechanism for resolving disputes. Also bear in mind that some clauses will survive termination of an agency, such as restrictive covenants which can prevent parties from competing or from soliciting employees.
Where there is no written agreement, things will be less clear but these kinds of issues still require consideration.
If the Commercial Agents Regulations apply (or if they might), be sure to check how they will impact on you and your opponent. Beware of its numerous pitfalls, such as the unenforceability of certain clauses and the need to notify claims.
4. Strengthen your position – your initial reactions matter
The steps you take immediately after a dispute arises can influence or even determine the outcome. For example:
- Where agent and principle simultaneously accuse each other of breaching their agency contract, how the parties respond and whether or not they continue to perform the contract can have dramatic legal consequences.
- Where there is doubt about how or where a dispute should be fought, being the first to act (e.g. by commencing proceedings in a preferred jurisdiction) can give you a massive advantage over your opponent.
- How documents are managed and created once a dispute has arisen can determine whether or not they will be admissible as evidence. This can alter the course and outcome of a dispute.
Getting these matters right will also improve your negotiating position. However, bear in mind that they can be tricky to handle correctly as complex legal rules apply, so it’s best to seek professional assistance, especially when there is a lot of money at stake.
5. Be realistic about the cost
The decision to involve your business in a dispute should always be commercially driven. In other words, only get involved if the likely result is that you will be in a better position financially than if you don’t, and try to keep any personal animosities to one side.
Work out at the outset what the full cost to your business is likely to be. That’s not always as easy as it sounds. Apart from legal costs and the risk of having to pay your opponent if you lose, there are usually other, less visible costs to consider such as lost revenue (e.g. caused by employee downtime), increased future costs (e.g. higher insurance premiums) and indirect losses (e.g. damage to your reputation). Some of these are difficult to identify and value, so take some time to think them through.
6. Don’t miss a good settlement
As many agency cases have shown over the years, disputes are risky, expensive and unpredictable. They are also stressful and distract you from your proper business. In many cases, the sooner you end the dispute the better it will be for you and your business – provided of course the terms are acceptable. New possibilities for settlement tend to open up as a dispute develops. A commercially savvy litigant will always have one eye on settlement and will favour a reasonable, timely settlement over a risky day in court.
Rod Dykins is a Senior Associate in our Dispute Resolution department
Written by Rod Dykins