Disputes in business transactions are common, but they don’t always require court intervention. Start by reviewing your contract, communicating directly, and considering mediation or arbitration. If those fail, litigation may be needed. The best strategy is prevention: clear contracts, strong communication, and proper documentation can reduce your risk and protect your business.
Business deals don’t always go as planned. Maybe one side misses a deadline. Maybe payment doesn’t come through. Maybe the product or service just isn’t what was promised. Whatever the issue, these problems can quickly turn into legal disputes, especially when communication breaks down. And when that happens, the time, cost, and disruption can hit hard.
Disputes in business are common. According to the American Arbitration Association, over 13,000 business-to-business (B2B) cases were filed with the organization in a single year, totaling more than $20 billion in claims. The good news? Many of these disputes can be resolved without going to court. But only if you know your options.
Start with the Contract
The first place to look is your contract. A well-written contract should include dispute resolution terms such as what happens when things go wrong, who decides, and where the process will take place. If your agreement requires mediation or arbitration before proceeding to court, those steps must be followed.
Contracts should also clearly outline jurisdiction, payment terms, delivery timelines, and other key deal points. Clear language helps reduce the chance of a dispute in the first place.
Try Direct Communication First
Before jumping into legal action, it’s worth having a direct conversation. Many disputes come from misunderstandings, not bad intentions. A phone call or face-to-face meeting may be enough to get things back on track.
If you’re uncomfortable having that conversation alone, you can bring in a third party, like a business advisor or attorney, to help keep the discussion focused and productive.
Mediation: A Voluntary Option
Mediation involves both parties meeting with a neutral mediator. This person does not make decisions, but rather helps guide the conversation so that both sides can find common ground. Mediation is confidential and non-binding so if you don’t reach an agreement, you can still pursue other options.
Mediation works well when the parties want to preserve their relationship. It’s also faster and more cost-effective than court. According to a report by the American Bar Association, 70–80% of mediations result in a settlement.
Arbitration: A Private Decision
Arbitration is more formal than mediation. In arbitration, both parties present their case to one or more arbitrators. The arbitrator then makes a decision, which is usually binding. That means it’s final and enforceable, with few options to appeal.
Many commercial contracts include arbitration clauses because arbitration is often faster and less expensive than litigation. It’s also private unlike court, which is public record.
However, arbitration can still be time-consuming and costly. And once the decision is made, you can’t ask a judge to undo it just because you don’t like the result.
Litigation: Taking It to Court
If the contract doesn’t require arbitration, or if informal methods fail, the dispute may end up in court. Litigation is a public, formal, and often time-consuming process. But it’s also enforceable and allows for appeals.
Lawsuits may be necessary when the opposing party refuses to cooperate or when substantial amounts of money are at stake. They can also be the right tool when a business relationship has ended and recovery is the only goal.
Focus on Prevention
The best way to handle business disputes is to avoid them. Here are some ways to prevent future problems:
- Write clear, thorough contracts
- Include dispute resolution clauses
- Keep good records of all communications and transactions
- Use purchase orders, invoices, and receipts consistently
- Stay responsive and professional when issues arise
Taking these steps now can save time, money, and stress later.
Business disputes can feel like a major setback, but you don’t have to handle them alone. Arnold, Willis & Conway works with businesses across West Tennessee to resolve disagreements efficiently and protect what you’ve built. Contact us today to learn your options.