Sometimes business agreements are finalised quickly and informally. A long-standing supplier relationship or a short email exchange confirming pricing between trusted contacts can feel sufficient when commercial relationships are strong and work needs to move quickly. However, B P Collins’ dispute resolution team has found that when circumstances change such as when margins tighten, projects run over budget or payment delays emerge, those same informal arrangements can quickly become the foundation of a costly dispute.
This is not an uncommon scenario. Research from the Federation of Small Businesses which previously indicated that around 70% of SMEs experience a commercial dispute at some point during their lifecycle, with contractual disagreements among the most common triggers. Litigation trend reporting from firms such as Gallagher also points to a rise in UK business litigation driven by economic pressures and the rising cost of living.
In the South East, the risk is particularly acute. The region’s economy is characterised by tightly connected supply chains, active construction and property development markets. In these environments, it may be tempting for businesses to prioritise speed and commercial trust over detailed paperwork. While this can help deals progress quickly, it can also leave critical terms including payment triggers, scope changes or liability allocation unclear, if a disagreement later arises.
What can you do?
When an informal deal begins to unravel, the first priority is to establish what the contract actually is. However, this is not always easy to ascertain. Even where there is no signed agreement, legally binding contracts can still arise through conduct and correspondence. Emails confirming pricing, purchase orders, WhatsApp messages discussing delivery timelines and evidence of work performed can all form part of the contractual picture.
An early evidence audit is therefore essential. This involves gathering all available communications and documentation to reconstruct the key terms of the agreement. Understanding what was agreed and how it was performed in practice helps to assess enforceability, identify strengths and weaknesses in the case and determine the most effective strategy to resolve the issue.
Once the evidential position is clear, the next step is typically a structured pre-action approach. Parties are expected to engage in reasonable pre-action correspondence before issuing court proceedings. A carefully drafted letter of claim can serve two important purposes: clearly setting out the legal basis of the claim while also signalling that the business is prepared to pursue the matter if necessary.
At the same time, commercial disputes are rarely just legal problems, they are also financial ones. As such it’s important to explore a settlement without damaging your litigation position. In many cases, once the contractual position is properly articulated, disputes that initially appeared entrenched can be resolved relatively quickly.
Where liability is clear and the documentary evidence is strong, it may also be possible to pursue summary judgment, enabling the court to determine the matter without a full trial.
The key lesson for businesses is that informal agreements are not necessarily unenforceable, but when they go wrong, resolving them requires swift legal analysis and a strategic approach. Acting early can often turn a potentially expensive dispute into a manageable commercial resolution.
For further advice and information, please contact B P Collins’ commercial dispute resolution team at
enquiries@bpcollins.co.uk or call
01753 889995
www.bpcollins.co.uk
