Michelle Rodger: It’s indisputable that avoiding legal action could save you a fortune

By Michelle Rodger
Published on Sunday 4 December 2011 00:00

AMERICA has a reputation as the most litigious country in the world, but we’re becoming increasingly better at it ourselves.

Statistics suggest that in happier times businesses are less likely to take legal action since building relationships is clearly more advantageous than falling out with clients or suppliers.

But during a recession, when cash flow is constrained, lots of businesses become more litigious, going after a speedy resolution just in case the company they are in dispute with goes out of business.

The cost of disputes to business is horrendous – millions of pounds in lost opportunities, time spent preparing evidence and organising witnesses. On top of this is the cost of representation, whether legal or official, the cost of damages payable if you lose, significant human costs in the form of stress and low workforce morale and ultimately the cost of damage to your reputation.

The most obvious examples of dispute lie in construction, perhaps the most litigious of all sectors. But the lessons to be learned from disputes about how to handle them successfully, and how to avoid them in the first place, can be applied across the business spectrum.

It’s about honesty, transparency and being upfront, respectful, righting wrongs, having loyalty, keeping commitments, admitting mistakes quickly and learning from them.

Yosof Ewing is managing partner of ConstructPRO UK and a qualified mediator and expert witness. He believes almost every dispute can be avoided, saving everybody’s time and money.

When you calculate the cost of establishing relationships in business over a period of time and balance it with the costs of a failed relationship – legal costs, finding new partners, establishing trust, increased supply costs and so on then it makes sense that you seek alternatives to allowing the relationships to fail, says Ewing.

Despite what appears to be common sense, the level of repeat disputes never ceases to amaze him, particularly in the building and construction industry.

Ewing says: “Our industry spends millions every year on PQQs [pre-qualification questionnaires] and building up relationships, but fails to employ the required level of due diligence at pre-contract stages to ensure that dispute is minimised, controlled or eradicated.

“This in turn wastes further millions in legal costs that are, in 99 per cent of cases, avoidable. I have yet to come across a dispute that couldn’t have been avoided.”

The solution comes down to two words: clarify expectations. If the parties to a contract do not fully understand what the other side expects from the get-go then sure as fate, a dispute will pop up and potentially destroy the relationship.

But there are some simple yet effective actions business owners can take to minimise the risk of falling into a contract dispute.

The first is to make sure you read the small print. All of it. And if there’s anything you don’t understand or disagree with, raise it before the contract is signed.

You should also ensure that your own terms and conditions of business cover everything you do accurately and fairly – not just for your own protection but for your clients and suppliers’ comfort as well.

Inaccurate costings are often the cause of dispute, so double-checking your figures at the outset and seeking agreement with all parties before you sign anything is crucial.

Credit control can spark conflict, so take action when payment is due rather than waiting until it is late.

Last but not least, it’s important not to be blinded by the numbers. It’s easy to look at the number of zeros on a large contract and jump right in. But Ewing warns that offers on the table may appear bigger than they actually are.

Comments

There are 2 comments to this article

Order by:

• Newest first
• |
• Oldest first

Page 1 of 1

• 1
• Show all

2

Willie Boy

Sunday, December 4, 2011 at 11:20 AM

Big business screws the little people and the UK culture is now one of abuse, smash and grab. All aided and abetted by rotten stinking politicians like Blair and Mandelson and their corporate raiding chums, it should come as no surprise that the get even mentality is now a way of life. But you know what, with the cost of litigation for small people there will come a time when folks start meting out their own fight back without recourse to the highly paid experts. Maybe the horrendous attack on the Law Society's chief accountant was not that of payback for the society saying that he got attacked because of his fighting the good cause against rogue lawyers. Maybe it was because the Society seeks to protect rogue lawyers by failing to investigate them. And why does Sir Fred Goodwin need a million pounds of security. What has he got to fear. Alisdair Hamilton QC, like many others tried to sue RBS for corporate corruption by misrepresenting the banks credit worthiness when they invited investment in a rights issue. Hamilton said that RBS held out that they were strong secure and solvent, but the court in Oban would not let him sue. Maybe the culture of the baseball bat, the fist and the boot, will do more to bring financial probity than all the lawyers in the land. Hopefully not, but the Westminster Tory Liberal government are planning to introduce legislation to restrict people's abilities to pursue compensation whilst at the same time watering down health and safety legislation. Yahoo cowboy, indeed.

• Report Unsuitable

1

Mark Dowe, Dumfries & Galloway

Sunday, December 4, 2011 at 10:53 AM

It is no secret that America and more lately Britain have become overly-litigious societies. It is also clear that many frivolous lawsuits that should never have seen the light of day have been the beneficiary of substantial settlements. Perhaps, though, a more rigorous future ‘loser-pays’ system would help to weed out puerile legal actions and claims in the first place rather than the ominously purported ‘no win, no fee’. [ ] The key difference between the UK and US system is such that under the British (and other continental European systems), the loser in an action has to pay a substantial portion of the winner’s legal fees, while under the American system, each party pays their own legal fees. [ ] The ‘all pay’ nature of the US system explains why America has always been tagged the ‘litigious society’. While the American system results in lower legal expenditures on a per trial basis, the incentives to go to trial are much higher under the American system than under UK systems.

• Report Unsuitable

Order by:

• Newest first
• |
• Oldest first

Page 1 of 1

• 1
• Show all

Logged in as:

Comment here. Start typing your comment here:

Post comment

Please adhere to our Community guidelines

Your view

Please sign in to be able to comment on this story.