What is a commercial dispute and how is it resolved?

A common occurrence in the corporate world, commercial disputes are caused by a range of issues, from contract breaches to intellectual property infringement. If not settled quickly and constructively, these contentions can have a detrimental impact on business reputation, finances and operations. But what is a commercial dispute exactly and how can it be resolved?

Any disagreement between business parties, a commercial dispute is subject to various regulations that can make resolution difficult. Below, we explain what this type of dispute involves, the different types that can arise, and the most effective methods to rectify such matters.

What is a commercial dispute?

A commercial dispute is a disagreement relating to commerce between two or more stakeholders. These disputes generally arise in relation to contract terms and conditions, fiduciary duties or intellectual property rights, and may be settled through court proceedings or alternative dispute resolution.

Types of commercial dispute

Disputes can concern almost any interaction between business parties, and therefore range from the simple to the complex. Discover the different types of commercial dispute below:

1. Contract disputes

Contracts are a fundamental feature in commercial dealings, and a leading source of disputes. Disagreements can stem from contract breaches and misunderstandings, both of which can involve failure to meet the obligations outlined in the terms and conditions. Common contract disputes include not paying on time nor performing agreed duties.

2. Intellectual property disputes

Intellectual property (IP) rights are vital to the ongoing success of many organisations in our increasingly technology-dependent business climate. As a result, disputes can arise over IP infringements regarding copyright, patent and trademark licences, IP ownership, IP misuse and more.

3. Fiduciary duty disputes

In a commercial sense, a fiduciary duty is a commitment to act in good faith for the best interests of your business and its clients. Examples include maintaining confidentiality, disclosing critical information and completing tasks that you are contractually obligated to perform.

Businesses depend on their stakeholders respecting such fiduciary duties, so any breaches can lead to significant disputes.

4. Property disputes

Property is often a key component for operational success, and one of the most valuable assets a business owns or has access to. Hence, commercial disputes frequently revolve around real estate, with disagreements arising over property agreements, lease terminations, development, damage, acquisitions and so on.

5. Supply chain disputes

Given the many layers, complexities and parties involved, supply chains are a common source of dispute between buyers and sellers. Issues include underperformance, trade disruptions, late or missed payments and failure to meet agreed deadlines.

6. Business sale disputes

Disputes often occur during or after the purchase of a business, and usually relate to vague or deceptive contracts, unforeseen liabilities or failure to perform certain obligations under the transaction’s terms and conditions.

What is commercial dispute resolution?

Commercial dispute resolution is a structured procedure that enables concerned parties to settle their differences with a fair solution, either in court through litigation or outside of court via alternative dispute resolution (ADR).

By reaching a resolution through one of the ADR methods outlined below, both parties can save valuable time and money.

Mediation

In mediation, an unbiased third-party, known as a mediator, facilitates discussion between disputing parties until they can come to a fair settlement. Notably, this mediator does not have the power to make a binding determination, but rather assists the parties to reach an agreement themselves.

Mediation may be court-ordered during litigation, but can also be arranged voluntarily between the concerned parties. Held in private, this confidential procedure can be a cost-effective and efficient option for dispute resolution.

Arbitration

Unlike in mediation, arbitration allows an impartial third-party to determine the dispute on behalf of the concerned parties. Although this procedure generally resembles a court process, its hearing and determination are held in private and kept confidential.

Each party shares their side of the argument to the arbitrator, who will then make a binding determination based on the statements and evidence. Importantly, parties are not required to abide by the rules of evidence applicable in court, such as during litigation.

An arbitrator’s determination, referred to as an ‘arbitral award’, may be legally-enforceable if registered with the court. In Australia, each state and territory has its own Commercial Arbitration Act, which is grounded in the UNCITRAL Model Arbitration Rules. Each of these Acts includes a provision for enforcing arbitral awards.

Note that arbitration is only permitted if both parties agree to its terms, which are often outlined in a pre-existing contract.

Expert determination

If a dispute concerns a particularly technical, complicated or sector-specific issue, then it may be appropriate to consult an expert for determination. Obtaining an unbiased opinion from an experienced specialist on the subject can shed light on the matter and help to resolve the dispute.

Get professional legal support with commercial dispute resolution

If approached poorly, a commercial dispute can cause significant harm to your business’ reputation and finances. Therefore, while professional legal support is not necessarily required for resolution, we strongly recommend seeking the assistance of an experienced commercial lawyer who can help you to secure the best possible outcome.

If you have any queries or wish to learn more about commercial dispute resolution, please contact our experienced commercial lawyers to get started today.