Partner Article

Why settle a Commercial Dispute?

There are a number of factors your business should consider if you are thinking of settling a commercial dispute.

• A settlement gives your business certainty and closure, and avoids the anxiety of having to wait for a judgment from court and the uncertainty about that outcome.
• Reaching a settlement avoids the expense of continuing with litigation. Even if you win in court and are awarded costs, you will rarely get all of your costs back from the other side.
• Your business should not consider it a sign of weakness to approach the other side to explore the chances of a settlement. This can be done at any time during the litigation process. Settlement negotiations facilitated by a neutral third party (generally in the form of mediation) are increasingly popular.

Other important factors include:-

Extent of your opponent’s resources -If your opponent does not have significant funds, it may be better to settle early rather than incurring significant costs. There is no point pursuing the dispute to trial if your opponent cannot pay the sums awarded.

Extent of your business’ resources -Bear in mind the balance between trying to get a return on the costs already incurred, as against the risks associated with incurring further costs. Is it better to settle straight away or is it feasible to continue to pursue or defend proceedings in the hope of achieving a better result?

Cost-benefit analysis

• Early on in the dispute, conduct a cost-benefit analysis of continuing to fight the case. You should compare your analysis with possible settlement outcomes.
• If an offer is made, you should consider its present-day value, bearing in mind how long it will take to get to trial and the potential cost of litigation.

Adverse publicity and precedents

Settlement is likely to be a priority if:

• Your business is concerned about the publicity associated with going to trial.
• You want to avoid setting an unhelpful precedent that might lead to further claims.

If you know the other side is more concerned about these factors, this can provide negotiation leverage.

Management time

Consider the strain on your business’ management team and your employees in investigating and defending or pursuing the proceedings.

Relationship with the other party

What relationship does your business have with the other party, and what relationship do you want to have with them in the future? Sometimes reaching an amicable settlement may be the best way forward for both parties.

As a general rule, settling a commercial dispute is preferable to the time, expense and worry associated with legal proceedings and the risk of losing!!

This was posted in Bdaily's Members' News section by Lee Bramley .