How to Handle a Contract Dispute
Handle a contract dispute by reviewing the contract terms, documenting your position, attempting direct negotiation, then escalating through mediation or arbitration before considering litigation as a last resort.
Last updated: February 2025
Step-by-Step Guide
Review the contract and document your position
Re-read the relevant clauses and gather all evidence supporting your interpretation and claim.
- •Create a chronological file of all correspondence and events.
Attempt direct negotiation
Contact the other party to discuss the dispute and try to reach a commercial resolution before incurring legal costs.
- •Put proposals in writing and set deadlines for response.
Follow the contractual dispute resolution procedure
Many contracts require escalation through senior management, then mediation or arbitration before court. Follow this procedure exactly.
- •Failing to follow the agreed procedure may delay court proceedings.
Consider mediation
Appoint an independent mediator through a body such as CEDR. Mediation is voluntary, confidential, and resolves most commercial disputes in one day.
- •Courts look favourably on parties who attempt mediation before litigation.
Escalate to arbitration or litigation if necessary
If other methods fail, pursue arbitration (if contractually required) or issue court proceedings. Send a letter before action first.
- •Consider the cost-benefit of litigation versus settling.
Enforce any resolution
Document settlement terms in a binding agreement or obtain a court order that can be enforced if the other party does not comply.
- •Settlement agreements should be drafted carefully to prevent future claims on the same issue.
Legal Requirements
The Civil Procedure Rules require compliance with Pre-Action Protocols before issuing proceedings. Courts expect parties to have considered ADR (alternative dispute resolution) and may impose costs penalties on parties who unreasonably refuse mediation.
Common Mistakes
Template / Example
When to Get a Solicitor
Once direct negotiation has failed, or earlier if the dispute involves large sums, complex legal issues, or requires urgent injunctive relief.
FAQ
How much does it cost to litigate a contract dispute in the UK?
Costs vary widely. Small claims (under £10,000) can be handled for a few hundred pounds. Complex High Court litigation can cost tens of thousands. Mediation typically costs £1,000-£5,000 per party for a day.
Can I recover my legal costs if I win a contract dispute?
In court proceedings, the losing party is usually ordered to pay a proportion of the winner's costs, but full recovery is rare. In mediation and arbitration, costs allocation depends on the agreement or arbitrator's decision.
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