Dispute Avoidance Pt.2: What you can do to prevent a dispute
Updated: Apr 6, 2021
When discussing commercial disputes, people tend to focus on the process of litigation and ignore the very human element which can quickly escalate or deescalate a dispute. At its heart, a dispute is a simple disagreement, and there are tried and tested methods that we can use to avoid it. In Part 1 we covered the options available to you when you find yourself circling the dispute drain hole, but it is also important to consider how you, the individual, can avoid or diffuse a dispute before it gets out of hand.
Where to start
The starting point is to know what you want to achieve. Do you aspire to a fight - to have your day in court? Do you want to prove that you are right and the other side is wrong, and that you hold both the legal and moral high ground? If so, and you haven't agreed to arbitration in your contract, you’ll find many lawyers that will happily take you on the journey to Court. ‘It’s a matter of principle’ are words that lawyers (and their bank managers) love to hear from clients.
However, if you are like most businesses, and you’d prefer to resolve the dispute, and maintain a business relationship with the other side, what should you do?
Reflect on the situation
How did it get to this stage? Were there shortcomings on both sides? What might you have done differently? These are all important questions, not least to try and avoid ending up here again. It is amazing how a little time spent reflecting can provide a new perspective and even if a solution doesn’t present itself, realisations and lessons learned can be invaluable tools for building future business relationships.
Walk in their shoes
How do you think the other side sees the dispute? Often disputes are said to be about one thing but are actually based on something completely different. When did the problem begin - was there a trigger around that time - a bad meeting, a terse email exchange? Once you can see the issue from the other side’s perspective you are 90% of the way towards solving it.
Communicate, communicate, communicate
Sadly, when problems arise communication declines. It should be the opposite, but often ego, anger, emotion and an unwillingness to tackle difficult issues gets in the way. In some disputes it is even the case that one side has never fully understood the full extent of the grievances held by the other, most likely due to a lack of open and effective communication.
Look over your notes on Reflection and Walking in their shoes and, even if you fundamentally disagree with their position, engage in a discussion with them. At worst, it reinforces your understanding of the situation, and at best it will help you understand the issues from their perspective.
There is sometimes a desire to tell the other side why they are wrong. But, as the saying goes, ‘The best way to persuade people is with your ears - by listening to them.’ Ask questions to better understand their perspective, and listen to what they have to say, even if you disagree. Often, by listening and understanding, it is possible to identify areas of common ground. Use those as a foundation to find more areas of common ground, and to whittle down the areas of difference.
Understand the landscape
Too often we jump straight from problem to litigation, but the law is just one tool in your arsenal. Think more broadly about other angles you can use to help persuade the other side that the best way forward is to resolve this situation. Might there be business opportunities that the other side would need your help to close? Might the risk of a legal action affect the reputation of the other side, and is that reputation important to them, or to their owners? Might the other side be in financing discussions that a legal action might affect?
People are driven by many different things, but rarely does the threat of legal action come close to changing behaviour. Imagine a debtor who receives from you the threat of legal action. From the debtor’s perspective, a 3 or 4 year legal action with the chance they could not only escape the debt, but saddle you with their legal fees in the process, might sound ideal. So ask yourself - why would they settle with you now? If you don’t have a good answer to this question, then perhaps legal action isn’t the best course just yet.
Value your claim
Once you understand the nature of the dispute, and are sure of the other side’s drivers and perspectives, think about the value of taking part in the dispute vs walking away or letting it ride? Take emotion away and consider the value of the following:
Time you will likely spend on the dispute
Cost of advisors
Potential mental strain on you and your colleagues
Your ability to prospect and win business
Publicity and reputational damage from losing the dispute
Risk of footing the bill for the other side’s legal costs
Risk of arbitrators making a wrong judgement.
This calculation can be done by professional firms or by you, depending on the amounts involved, but as a rule of thumb, your claim is worth about 50% of the amount you think it is worth, and even less if your claim is against a company or person overseas.
Once you have reflected on how you got here, seen the problem through the other side’s eyes, validated your assumptions with the other side and valued your claim, 9 times out of 10 you’ll pick up the phone and be able to work out a way forward that gives you more than the claim is worth, and allows you to keep on doing business (if you wish) with the other side.
Get in touch today to find out how I could help to resolve your dispute.
Want to learn more? Stay tuned for Pt.3 - The increasing role of innovation in resolving disputes