Trade disputes are of all times. In a business relationship, discussions may arise regarding each other's legal rights and obligations. On one hand, the supplier's main obligation is to deliver the product or service in a timely and proper manner, while on other hand, the buyer's main obligation is to fulfil the complete payment on time. This was already the case among the Greeks and Romans and is no different in current times during the Corona crisis. However, there is one essential difference. We are headed towards an enormous economic recession. Many companies are already struggling to (continue to) meet their payment obligations, and in a few months' time, the number of business owners who will no longer be able to pay at all will be uncountable. A wave of bankruptcies will follow.
For business owners who will soon no longer be able to meet their payment or delivery obligations, difficult decisions will have to be made. Some will acknowledge that they are unable to meet their obligations and will have to consult with their supplier in order to request an extension of payment term, or to make a payment arrangement. However, as always, there will also be companies who will look for excuses to delay payment. They will dispute your claim. It is possible that you are already struggling to keep your head above water. You will be focused on your own financial situation and towards those customers who are still able to meet their obligations, and do not dispute your claim.
Do you wish to avoid dealing with even more complaints or disputes? Then it is important to act now. Especially now that some of your customers are still operational. In a few months, after summer, there may be nothing left.
Good dispute management
Part of a good dispute management is, of course, that complaints are acknowledged and dealt with in a timely and serious manner. Our advice is to resolve existing trade disputes during the time of this crisis, so that you still have a chance of generating cash in the short term. Solve your trade disputes now!
This applies to both national and international transactions. Because the measures against the Corona virus differ per country, it may be more difficult to get in touch and solve a problem with one customer than another. The following tips apply to both national and international commercial transactions.
1. Make an overview of the dispute
Before contacting your client, make an overview of the dispute:
- What exactly does the complaint entail?
- Has the complaint been made in a timely and correct manner?
- Is the complaint (partly) justifiable or not?
- Is there a shortcoming that can still be rectified?
However, the most important question is: what does your customer wish to achieve with the complaint? Do you think that the customer still wants to fulfil the agreement, for instance, if a product has not been delivered properly or too late? It is possible that your customer is looking for a compensation or a discount? Does your customer wish to terminate the agreement?
And what about the commercial relationship between the parties? It makes quite a difference whether there is a long-term relationship or a one-off transaction.
If all of this is still unclear, make sure to contact your client to clarify this. Moreover, it is of course possible that the complaint made by the customer is completely unjustified, and that you have done everything possible to make this clear to the customer.
2. Get in touch with the customer and clarify the reason for this contact
This can be done through e-mail or by phone, however it is always advisable to confirm this in writing. Invite the client to discuss the dispute with you and indicate what you would like to resolve. By doing so, you are helping to put an end to the dispute.
3. Invite your customer to a meeting
In this day and age, there is little or no room for a physical conversation, but every company has the technical ability to organize a virtual meeting. A telephone is already an excellent device for this. A good telephone conversation can also be very enlightening and possibly lead to a solution, however it is preferred to have a face to face meeting. When determining each other's points of view, interests and negotiating a solution, non-verbal communication often plays a more important role than verbal communication.
If an appointment is made for an online meeting, record it in writing and make sure that the right people are present during the meeting. Of course, it depends on whether you are doing business with a single proprietor where you may already have been in direct contact with the owner, or with a large corporate where you are dealing with a purchasing department.
Moreover, do not assume that if you have an unpaid invoice from a large corporation, that you will definitely be paid. Whether you are dealing with a small business or a large corporation, the expected economic recession will hit all companies. Don’t let any disputes be ignored regardless of who you are doing business with.
4. Prepare the conversation well
Note down the most important points that are important for you in advance. Introduce the conversation and then offer a listening ear. Let your client speak, try not to interrupt them and clarify where the problem lies. If you have already clarified the most important aspects for you and your client, and identified the problem, try to prepare several solutions or alternatives in advance. Consider the worst-case and best-case scenario to determine your preferred course of action.
5. Be prepared to settle
There must be a willingness to settle on both sides. As a supplier, you should also show some flexibility in reaching a commercial solution. This solution may be to provide a credit/discount on the account receivable, however, can also be incorporated in future transactions. You (and your client) should always keep in mind that if the negotiation fails, there is little else left to do but take legal action. Proceedings cost money and a lot of time.
In some European countries, such as England, proceedings are very costly and in southern European countries, proceedings can take years. In general, many court proceedings take much longer now. It is often advisable to make a deal in which you receive less now, but in doing so reduce the risk that you will end up with much less of your claim after a lengthy procedure.
For example, on a trade claim of € 50,000.00 against a British customer, you may lose € 10,000.00 to € 20,000.00 in procedural costs that you will ultimately never receive back. It is then more advantageous to settle the dispute now and, for example, to settle for a payment of € 40,000.00 immediately, than to be left empty-handed in a few years’ time.
6. Record agreements properly
If you come to a solution, make sure that this solution is recorded properly in writing (e.g. in a settlement agreement). Make clear agreements about the payment as well as the time of the payment. Have your client sign the content of the settlement agreement or confirm it by e-mail for approval.
7. Hire a specialist
It may be the case that the dispute is so complex or that the stakes are so high that the conversation reaches a complete stand still. In this case, you may require assistance in resolving the dispute. The lawyers of Bierens Law can help you with that. We have a great deal of experience in the mediation of alternative dispute resolution in national and international trade. We can advise and assist you in the preparation of your meetings, as well as during the discussions. We can also help recording the agreements and monitor their execution.
The lawyers at Bierens Law specialise in solving commercial disputes in a national and international context. In many cases it is better for both parties to reach a quick settlement, than to sue each other for years on end. This only results in more costs, time and frustration. Especially in southern European countries, proceedings can take years. It is often preferred to sit down with both parties - physically or online - in order to clarify the interests of both parties and reach a mutual satisfactory solution.
The advantage of a quick solution
A supplier will be able to expect the payment quickly and the customer will be heard in its complaints and will also be assisted in a settlement. Especially during this Corona crisis. Such a quick and relatively inexpensive solution also offers the parties the advantage that a foundation has been laid for further cooperation or that the cooperation is terminated without unnecessary costs.
Are you dealing with a trade dispute and would you like to know what we can do for you? Feel free to contact us. We will be happy to help you.
Author: Bart van Onna