Contract disputes come in all shapes and sizes with financially smaller claims requiring simpler courses of action than their more expensive counterparts. Michael Lent, a commercial litigation funding specialist at Annecto Legal discusses the best ways to approach a breach of contract claim.
Disputes arising from contract breaches are common in any area of business but the sales sector harbours a particular inclination for broken deals: It’s likely you’ll bear witness to a contract breach or two at some point in your sales career.
Whether the fault of the broken contract lies with a supplier or a buyer, a breach of contract can leave individuals and businesses alike in potentially expensive, stressful and time consuming situations.
Can I pursue legal action for breach of contract?
The important elements to consider beforehand are if an amicable solution can be achieved out of court, and whether you have a strong case for legal action.
A primary concern when considering legal action is finance: A claim under £10,000 can be dealt with using written evidence, without a hearing, and costs up to a few hundred pounds in court fees. These claims can therefore be processed rapidly and at low cost.
A larger breach of contract claim poses more significant issues because the larger the claim the higher the court fee: Claims of £200,000 demand fees of £10,000. Court fees are just a fraction of the overall cost, as you will also want a barrister to present your case effectively. Overall costs quickly become tens of thousands of pounds.
Funding a breach of contract claim
The most important thing to do is to seek expert legal advice as quickly as possible. Even if the finances are taken out of the equation entirely (which they won’t be), knowing how to act and efficiently managing breach of contract litigation requires specialist knowledge.
The second thing to do is consider how you or your company will fund the claim. It’s important to remember that the loser of a case is responsible for the fees of both sides. This is why it’s estimated that a third of companies don’t take claims to court, because the financial implications of losing are too serious.
For this reason, it’s vital you are aware of the alternative methods of funding available. Knowledge about 'No Win No Fee' setups is relatively widespread and it can prove a useful way to access legal advice. The downfall is that you’re still liable for court fees and any resulting costs if you lose. You may also be able to use before-the-event (BTE) of after-the-event (ATE) legal expenses insurance or third party litigation funding. The right combination of these options can provide a solution whereby all costs, win or lose, are taken away from you and managed by funders.
With the right funding you could pay nothing up front and just a percentage of the monies won in the event of a successful outcome. In other words, you can reduce your risk by 100% and yet only give away 10% to 30% of your damages.
You should discuss these options with your legal team at the earliest opportunity. You may also consider taking independent advice, as your own solicitor may not fully appreciate all of the options available to you (or may have their own interest in funding your case in a certain way). By ensuring you pursue your case with the right funding you negotiate from a position of strength and maximise your chances of achieving an appropriate settlement.