As should be fairly self-evident, the contract is the starting point for a contractual dispute. Each contract depends on its own terms and the conduct at issue, and therefore each dispute has its own uniqueness.
There are, however, some common key features to such disputes.
Establishing the terms of the parties’ bargain is a crucial step before advice can be offered. Sometimes there will be a single written agreement signed by both parties. Often that will not be the case, even for reasonably large projects. The contract may be partly written and partly oral. More commonly, various representations and negotiations prior to formation may form part of the agreement (certainly in the absence of an “entire agreement” clause), either through the operation of the Contract and Commercial Law Act 2017 (formerly the Contractual Remedies Act) or, less directly, the Fair Trading Act. The agreement may have been varied as matters have developed.
A full discussion of the current approach to contractual interpretation is beyond the scope of this post. It is sufficient to say that the factual and commercial context is relevant to interpretation in combination with the terms as recorded or alleged.
A contract cannot address every possible permutation of events. There will be developments which are not expressly covered by contract, or disputes about whether or not certain items are covered e.g. changes to the scope of work. If a contractor is undertaking a particular job for the first time, it may be more difficult than expected (and take longer and cost more).
Where there are disputes about how matters have evolved, it is essential to get a good overview of the relevant correspondence.
Ideally lawyers will have been involved with this correspondence (particularly litigators, once it is apparent that the matter could become contentious) to preserve the client’s position to the greatest extent possible. This includes setting out clearly what is expected, consequences if the demand is not met and limiting the opportunity for waiver and estoppel arguments in the future. It does not mean, however, conducting the litigation through correspondence. Letters should be succinct rather than engaging in point-scoring for its own sake.
Importance of commercial objectives
Litigation is a means to the end of achieving a client’s commercial objectives. Sometimes commencing proceedings will be the best way of progressing what the client wants to do, but it is important to establish what the client wants to achieve in practical terms to make sure that litigation is consistent with those aims.
This is part of the lawyer’s skill. The client may not know what they want to achieve until probed by their lawyer. They may think that they want to sue, but saying “I want to sue them” involves many assumptions which need to be unpacked. For example, it could be code for any of the following:
(a) The other party will not engage with correspondence or discussions, so there is no point in trying.
(b) I am stressed, unhappy and frustrated, and want the other party to feel the same.
(c) I want to spend tens or hundreds of thousands of dollars as a matter of principle or to send a message to the market, even though I will not get the money back (perhaps less commonly).
Unless the adviser knows and understands what in particular the client wants to achieve, it is impossible to formulate advice on strategy.
Often the dispute will relate to a project of some significance, in terms of value and importance to the business (both on the supplier and customer side). Whether there is a historic and/or ongoing relationship can be a major consideration. If the dispute does not relate to a significant piece of work (in terms of value or the ongoing relationship), it may be more efficient to simply walk away, regardless of the legal merits.
Value and stress
As a related to point, the significance of the project can cause stress to the individuals involved. A manager may have made a case to select a particular contractor, and feel responsible for his or her actions (or delays) to the rest of the business. Individuals will seek to downplay their own responsibility for the dispute and blame the other party. Advisers need to take an objective approach when providing advice, while still being sympathetic to the position of the client.