Business Litigation

Business Litigation—Jon Cryer’s famous quote is that litigation solves everything. The fact is that litigation is very much the last option to consider.

Businesses frequently enter into contracts with each other without anticipating the risk of a dispute arising. A family lawyer will tend to recommend his more affluent clients to enter into pre-nuptial agreements. The same principle applies to businesses .

Sometimes the commercial contracts entered into by businesses do not cover off key issues discussed in negotiations and this can lead to problems.

Any business litigation can arise on a b2b basis or when entering agreements with individual customers.

Business litigation usually  arises when one party believes the other part is in breach of contract

This is where one party fails to do what they have agreed to do or where one party believes the other has not done what was promised . It may be that the defaulting party will be allowed to remedy the breach .  Sometimes, one party may believe the breach may be deemed to be too serious and they can then terminate the agreement .They may then sue for breach of contract.

Breach of contract can occur in the following circumstances:

1.Failure to perform and act or an obligation

An  example is where a company manufactures a product and the contract states it is to deliver it within a certain timeframe to its customer. This delay may have had an adverse impact on the receiving party. The business may have agreed to sell the product into its supply chain. Unfortunately, due to the manufacturer’s delay there  be a knock on effect. This will have resulted in consequential financial losses for the other party to the agreement.

2.Non payment of a commercial obligation

Under some commercial contracts there are set targets for the completion of certain elements to the contract. There may be penalties within the contract dealing with any possible breaches. However, the breaches may be numerous and the accumulative effect may have a huge impact on one of the parties.This may result in consequential financial losses which flow from the breach.

3.Breach of confidentiality

It may be crucial for the terms of the business agreement to remain secret. The release of information discussed during the course of the agreement may have a detrimental effect on both parties ability to carry out their obligations. The disclosure of information may result in the loss of the contract and create a right to sue.

Jurisdiction issues are an important feature in business litigation. The client needs to be aware that it may not be possible to sue in the UK. This may be due to the fact the agreement is silent on this point.

The rule of thumb is that if the contract is silent on the point, then the right to sue falls in the country where the contract was entered  into by both parties. However, disputes can arise on this point.

Businesses should always ensure a jurisdiction clause is inserted. A client’s preference should always be to litigate in the courts within England and Wales. The law is more certain with well established case law and statutory rights to support a litigating party.

Limitation can also be a major hurdle for some clients who delay bringing their claims. The Limitation Act 1980 allows a business 6 years from date of the breach occurring to issue proceedings.

Otherwise the claim is likely to be statute barred and out of time.

Is it always likely that court proceedings will be inevitable?

The corporate client is always well advised to avoid litigation. The Pre-Action Protocol sets out the procedure which litigating parties must adhere to .Every attempt should be made to avoid court proceedings being issued. To issue in the courts is a very expensive procedure and there is no guarantee of success. The courts actively encourage both parties to negotiate and narrow the issues between them.

Once proceedings are issued on court allocation both parties are asked to confirm if Alternative Dispute Resolution(ADR) has been explored. The benefit of ADR is that the appointed arbitrator’s decision is final

However, it is not always possible to compromise a claim and litigation is a necessary evil to protect a company’s contractual position.

1. What are the pitfalls to litigation and is there a solution?
2. The cost of running a claim is very expensive.Putting aside the fact that litigation can be time consuming. It also requires lots of human resource and effort in preparing the case for trial. There is no guarantee of success. Therefore a business needs to have the reassurance that the best legal opinion is available. Their exposure to paying own and adverse costs is reduced to a negligible or zero level.

The price for this peace of mind is well worth paying. In business as in life you do not get something for nothing.

Our funding partners who have established relationships with experienced lawyers. They vet all of the claims and the prospects of success must be 65% plus. A detailed costs budget is prepared for the funder by the vetting solicitor. These solicitors have a success rate of 80 percent and an excellent track record. This brings a degree of confidence for businesses facing litigation.

The provision of funding for the entire claim includes indemnity for legal fees. It also includes payment of the after the event insurance premium and all other running costs. Amongst the fees covered are court fees and expert fees. The issue fees for a high value commercial litigation claim is 5 percent of the estimated value of the claim.

The cash flow for a business would be crippled if it had to fund a high value claim. It may take two years to resolve and hundreds of thousands of pounds to pursue.

If your business require a novel and cutting edge approach to business litigation contact us. We will put you in touch with our funding partners