Review any existing contracts you have signed to familiarise yourself with any dispute resolution clauses you may have agreed to.
Do you have a plan for managing disputes that may arise in business? If not, we explain why it’s worth considering and how to get started.
Whether it’s an issue with invoicing, a potentially problematic customer, a dispute with your business partner, or a conflict about a tenancy agreement, managing disputes in your business can be stressful.
Exactly how you’d like to handle disputes may not be something you want to think about in advance – but having structures in place before disputes arise can be worthwhile. Early and effective communication can prevent significant problems.
Here are some tips to help you take the stress out of managing future disputes.
Think of it as another emergency plan
As a business owner, you must plan for all contingencies. Whether you work from home or have your own premises, you should have a plan to deal with unexpected events or emergencies.
Planning for disputes that might arise in the future is like having an evacuation plan. Preparing in advance allows you to plan for what to do should something happen and what steps to follow. Disagreements occur from time to time, and resolving them can take time away from running your business.
Be informed about dispute resolution processes
You might find dispute resolution processes in the terms and conditions of contracts with parties you already work with within your business. When entering a contract with a new business, research them, look at business reviews to see what people are saying about them and how they tend to handle negative comments.
If you’re dealing with bigger businesses or the government, don’t assume there are terms and conditions covering disputes. You need to make sure your contracts have transparent terms and conditions and a clear process for managing issues.
Action to take
Include dispute resolution clauses
The next time you set up or renew an agreement with your customers, suppliers or other businesses, consider including a dispute resolution clause in the contract. It could help you negotiate and avoid legal proceedings, keep commercially sensitive issues confidential, and protect your relationships with other individuals and businesses.
These clauses are designed to outline how your business will manage a dispute and could include:
- How to address an issue if it arises: Including the timing and the process. For example, you might ask that any issues be outlined clearly in writing by email and receive a response within an agreed-upon time.
- Negotiation requests: Legal proceedings can be expensive and time-consuming, so it’s worth outlining a process to follow to try to negotiate a solution before this is needed.
- Alternative options to resolve a dispute: Mediation or arbitration could be used to resolve a dispute, so you would need to be clear on what the process would be, who would mediate, and other details, etc.
You could also include the timing and location of legal proceedings if necessary in the future. Being clear from the start of a new contract means there’s less room for confusion if something happens later.
Consider the jurisdiction
Giving some thought to where dispute resolution takes place could save you the cost of legal fees and stress. Contracts are not limited by location and are often created across different legal jurisdictions, especially when your business is involved in digital transactions. Having a dispute resolution clause can clarify this and provide certainty. Sometimes, clauses might require a dispute to be heard and determined by an overseas or interstate court. Alternatively, the dispute could potentially be transferred, heard, and treated differently depending on the circumstances.
If the proper process is not followed for dispute resolution or jurisdiction clauses, resolving a dispute may take longer and become more complicated. You may also want to consider professional advice when including such a clause or the impact such a clause could potentially have on your business.
Make sure the dispute handling process is clear
If a dispute does arise in the future, you want it to be as easy as possible for you and the other party to follow the dispute handling and resolution process you’ve planned. You might like to brainstorm potential disputes that could apply to your business and industry to check that you have considered these.
In your agreements, make sure it’s clear who to contact regarding any disputes with your business and who to contact within the other business, whether it’s an ongoing, new or one-off business relationship.
If you do add dispute handling provisions to your agreements, it’s always worth getting professional legal advice. If the clauses and contracts are not properly prepared, you could later run into issues enforcing the clause, creating further problems.
Explore our SBDC dispute resolution service
While having a dispute handling clause in your business agreements can be helpful, it’s really up to you. You and any parties involved in a dispute could still voluntarily agree to attempt dispute resolution before you need to consider litigation.
At the SBDC, we offer a no cost dispute resolution service with the option of mediation ($125 per party) when suitable. As part of the process, small business owners and others involved in a dispute cooperatively work towards resolving the dispute, guided by our friendly and impartial case managers. Find out more about the SBDC’s dispute resolution service and whether this option may suit you if you’re facing a business to business or business to government dispute.
Learn more about your options
Planning to handle disputes in advance is like preparing for an emergency evacuation or other situations that can impact your business. To learn more, you might like to explore the following information:
