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Disputes rise as businesses crackdown on contracts and partners fall
out
COMMERCIAL
disputes are rising as businesses verify the terms of their
contracts with customers and suppliers as a result of the current
economic slowdown and business partners lock horns over the futures
of their companies, warns the Law Society.
Businesses, for example, restaurants, manufacturers, grocers and
their suppliers and customers, are looking at the terms of existing
contracts to ensure they are being complied with.
Law Society President, Paul Marsh, says:- “Our members are
telling us that companies are exercising caution with their
contracts as they tighten their belts. In a healthy economic
climate, businesses tend to be less strict, but when finances begin
to suffer they are less relaxed.
Disputes tend to arise over what is a fair or unfair contract term.
In the current climate many contracts will be under the microscope.”
The Society is also hearing from members that business partnership
disputes are increasing as disagreements over the future of a
business in tough times rise to the surface.
The rising tension internally and externally is a threat for those
businesses and needs to be dealt with before it is too late, says
the Law Society.
Paul Marsh says:- “Going through the courts is sometimes
unavoidable in commercial disputes but there are other options. Many
solicitors, as well as being skilled litigators, are also trained in
alternative dispute resolution methods, such as mediation. Not every
dispute needs to go to court, but the need for a legal professional
to iron out and explain the contractual liabilities is vital.”
Recent statistics show that businesses are struggling financially,
with the number of companies becoming insolvent up 15 per cent in
the second quarter of 2008 compared with the same period in 2007.*
Paul Marsh says:- “Businesses have a lot to contend with in
terms of raising capital, chasing debts, paying rent and so on.
Clearly they are struggling and pursuing every option to survive,
including checking their contracts and seeking to enforce terms.”
Small businesses are particularly vulnerable to larger firms seeking
to impose strict terms in their contracts with SMEs, says the Law
Society.
Paul Marsh says:- “Larger companies are taking a tougher line
over the terms of the contracts they have with smaller suppliers and
customers. For example, they might look to extend the period by
which payments to their smaller suppliers are made. However, smaller
companies might fear challenging them in case they lose favour and
their contract. Yet there are ways smaller businesses and customers
can protect their position if they take advice from a solicitor.”
Businesses seeking legal experts and advice can find out more
information from the Law Society’s Lawyers for Your Business
initiative. Visit their
website for more information.
* Figures obtained from the Insolvency Service. |
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