Four questions to answer before you call a solicitor

When a business owner contacts a solicitor about a dispute or a deal, the first question is usually a legal one: can I sue, can I get out of this contract, what should this agreement say? Those questions have answers, and the answers are more useful when the solicitor also knows what the business needs from the situation. A claim that would succeed in court may not be the best way to get paid, keep a customer or protect a source of supply.

Take a business that buys a large share of its stock from one supplier. The supplier delivers late for several months and the business loses orders as a result. The business may well have a claim for breach of contract. If no other supplier is ready to take over, though, issuing proceedings could end the relationship before the business has replaced it. A letter setting out the claim, used as the basis for renegotiating delivery terms and agreeing compensation, may achieve more than a court judgment would. The legal analysis is the same either way, and the choice between the two depends on the commercial position.

Four questions to answer before you call

These questions take a few minutes and give your solicitor what they need to advise on the result you want, as well as on your legal rights.

1. What do you want to achieve? Be specific: to be paid in full, to be paid something quickly, to keep the customer, to leave a contract, or to stop a former employee approaching your clients. The answer decides which options are worth considering.
2. What is it worth? Put an approximate figure on the outcome. A dispute over £4,000 and a dispute over £400,000 justify very different amounts of time and money, and the cost of any legal action needs to be in proportion to what is at stake.
3. What is the relationship worth? Consider whether the other party is a one-off, or a customer, supplier or co-owner who will matter to your business over the next few years. The answer can change the right approach from pursuing a claim to renegotiating.
4. What happens if you do nothing? Work out your position if you take no action, or accept a modest settlement and move on. Knowing your alternative helps you judge whether an offer is worth accepting and how far a dispute is worth pursuing.

Give your solicitor the answers at the first conversation, together with any constraints, such as a deadline, a budget or a concern about publicity. The advice can then compare the options against what you have said you need.

Three situations in which the answers change the advice

An unpaid invoice

A customer owes your business £5,000 and has not paid. If the debt is not disputed, the legal route is well established: a letter before action, then a court claim, then judgment if the customer does not defend the claim. In a contract between businesses, you can usually add interest and a fixed sum for recovery costs under the Late Payment of Commercial Debts (Interest) Act 1998. If the customer is an individual or a sole trader, the Pre-Action Protocol for Debt Claims applies: the letter of claim must enclose specified forms and information, and the debtor has 30 days to reply before a claim is issued.

Before you start, consider whether the customer can pay. A judgment has to be enforced, for example through enforcement agents, an attachment of earnings order, a third party debt order or a charging order, and enforcement only produces money if the debtor has income or assets. Consider also whether this is a long-standing customer with a temporary cash-flow problem. A payment plan confirmed in writing may recover the money and keep the account, and you can still take action if the plan is not kept.

A dispute that could settle

You may be confident that you are right and still conclude that a settlement is the better result for the business. Court proceedings take management time over months or years, the legal costs you recover if you win are usually less than the costs you have spent, and the outcome of a trial is never certain. The court rules expect the parties to exchange information and consider settlement, including mediation, before a claim is issued, and the court can order parties to take part in a form of alternative dispute resolution. A party that unreasonably refuses to consider settlement can be penalised when the court decides who pays the costs.

Comparing the amount you are likely to recover after costs with a settlement offer is a calculation your solicitor can help you make, using figures for each stage of the claim.

A shareholder agreement between founders

Two founders ask for a shareholder agreement and cannot agree the leaver provisions, which set what happens to a founder's shares if they leave the business. The leaver provisions raise questions the founders may not have discussed: how long each of them expects to stay, what happens if one stops contributing, and what price a departing founder should receive for their shares. Once the founders have discussed and answered those questions, the drafting is quicker and the agreement records a decision they have both made.

Giving your solicitor the commercial context

Your solicitor can only take into account what you tell them. Useful background includes how important the other party is to your business, how much management time you can give the matter, whether publicity would cause you problems, what you have already said to the other side, and the result you would accept today. If any of this is sensitive, say so at the start. Bring the main documents to the first conversation, such as the contract, the important correspondence and a short timeline of events.

In return, you should expect advice that sets out the options, the likely cost and timescale of each, the main risks and a recommendation. Where the right choice depends on your commercial priorities, the advice should say so and explain how each option would serve them.

Keeping an eye on time limits

Taking time to decide what you want should not mean letting a deadline pass. Most claims for breach of contract must be issued within six years of the breach, and some claims have much shorter time limits. If a dispute has been running for a long time, check the limitation position before spending further months negotiating, because the other side can defeat a claim that is issued too late on that ground alone.

Putting it together

Before you call a solicitor, write down what you want to achieve, what it is worth, what the relationship is worth and what happens if you do nothing. Share those answers and any constraints at the first conversation. The advice you receive can then deal with your legal position and with the result your business needs.

If you would like to talk through a situation, send us a short summary with your answers to the four questions, and we will arrange a call with one of our solicitors.

This article is one solicitor's view and general information, not legal advice — always take advice on your own situation before acting. AD Solicitors is a trading name of AD Solicitors Limited, a recognised body regulated by the SRA (no. 8011228).