Dispute Resolution between company and customer

16 July 2021

It does not matter how good a company is or how many satisfied customers it has, there is always the potential for disputes to occur. Of course, good practices and high standards of customer service can minimise this risk, but there may still be occasions when the company and its customers reach an impasse, where neither can agree on how to take a matter forward. Here we look at ways in which problems can be prevented from turning into disputes and, if they do, how best these issues can be managed and, ultimately, resolved to the satisfaction of all the parties involved.

Why is dispute resolution important?

The Federation of Small Businesses (FSB) estimates that disputes cost English and Welsh small businesses in excess of £12.4 billion a year (1). A report the FSB published in December 2016 also found that 70 per cent of its members had been involved in at least one dispute between 2010 and 2015. The average sum that was under dispute was over £18,000 and each of these disputes ended up costing another £17,000.

Around 72 per cent of disputes involving smaller businesses were related to the late or complete non-payment of fees or money owed. According to the FSB, this was the equivalent of 2.4 million businesses and the most common source of disputes was customers (57 per cent), followed by suppliers (21 per cent).

The amount of money these disputes can cost and the number of businesses affected highlights why it is important to resolve problems as quickly and efficiently as possible, thus ensuring that they have the minimum impact on a business’s finances, as well as on its reputation. This is especially vital for small businesses, whose very existence can be threatened when disputes occur.

Preventing disputes from escalating

Having clear procedures in place for both customers and suppliers can help businesses to prevent or deal with disputes. These policies should include how complaints are dealt with, as well as service level agreements. Prevention should also include making sure that customer expectations are agreed upon by all parties, along with how these expectations will be met. This information should form part of a clear, concise, signed contract that is abided by all signatories and any associated workers.

Another key way businesses can prevent disputes from escalating is by ensuring that all complaints are noted and that all complainants get a fast and efficient response. This should be done in a calm manner, with written records of communications being kept; should they be needed in the future. This may be the case if a dispute ends up in court.

It is important that staff at all levels, understand how complaints should be dealt with and company training should include complaints management procedures. It is also vital for every worker to fully comprehend the importance of maintaining a company’s good reputation, especially in situations where a business’ good name may be in jeopardy.

It is extremely important for everyone working within a company to understand that ignoring a problem is never a good solution when issues arise. If informal discussions fail to resolve the dispute then companies should consider third-party mediation.

Informal resolutions

In the first instance, companies should try to use informal methods to resolve a dispute. This may include:

  1. Meeting with the customer to discuss and record the issues in writing and to revisit the details of any quotation or contract that is relevant to the dispute.
  2. Agreeing on a way to move forward that is acceptable to both the company and the customer. Even if a business cannot come to a complete resolution with a company, a partial agreement can be very effective in demonstrating that a company is reasonably trying to find a resolution and get to a successful outcome.
  3. A business ensuring that a customer is aware of its complaints procedure and can make use of this.
  4. If a resolution cannot be reached and a customer has gone through a company’s complaints procedure, a business may direct them to the Dispute Resolution Ombudsman. Businesses can also make use of the ombudsman in order to resolve disputes.
  5. Never ignoring a dispute at any point in the process. It is very unlikely to go away of its own accord.

What is mediation?

Mediation can be key to resolving disputes without the need for them to go to court. It is a form of what is known as ADR or Alternative Dispute Resolution. This is aimed at offering a confidential, quick and cost effective way of resolving disputes.

This form of dispute resolution is different from court proceedings in that it does not involve a verdict being imposed on a business by a judge. Instead, companies and customers are encouraged to engage in productive communications in order to find a solution that is agreeable to all parties. This process is enabled and facilitated by the skills of a mediator.

The CEDR 2018 Mediation Audit (2) states that mediation resolves 89 per cent of disputes, either on the day that the mediation occurs or shortly afterwards.

Benefits of mediation

There are several benefits of mediation that both businesses and customers can enjoy. These include:

The chance to reach a resolution in a manner that is not as long-winded or expensive as disputes that require court proceedings to reach a solution. A Doing Business 2017 report (3) by the World Bank found that in Britain, it takes an average of 437 days to take a court case from its start to when the judgment is enforced and it is concluded. What’s more, legal fees in these cases were found to account for almost 44 per cent of the total cost of the dispute.

Mediation can be a far less stressful solution than a long, drawn-out court case.

Mediation can demonstrate that a business, even one in dispute, is willing to work with its customers or clients to resolve problems when they occur.

Mediation can mend broken relationships by encouraging all parties to work together to reach a positive outcome.

Alternative Dispute Resolution Explained

As mentioned previously, ADR refers to the way in which disputes between customers and companies can be resolved without the need to go to court. The British government encourages this as a means of dispute resolution, stating that this can be good for businesses as well as consumers (4).

Forms of Alternative Dispute Resolution include:

Mediation – where independent third parties help disputing parties reach an agreed outcome.

Arbitration – where a third party considers the facts of a dispute and reaches a decision that may be binding to either both parties or one of the parties involved.

Choosing a mediator; factors to consider

Businesses need to ensure that the mediator they use is the best for the job. In order to do this, it is worth considering such factors as:

Experience and background

Mediators may come from a legal background but there are others from a range of different professions. The type of dispute may dictate which mediator is best-suited to the case. It could be someone with legal experience, for example, or perhaps an accountant, engineer or surveyor would be a better fit for the job.

Personality and style

A mediator’s style or personality could be a determining factor when it comes to reaching the best outcome from the process. This is why it can pay to research mediators and find out more about both them and their practice. Reputable mediators should not mind sharing this information. Many dispute resolution providers will have a panel of mediators and will work to help clients achieve the best match.

Professional standards

It can be worth checking to see if mediators have professional mediation training, rather than just being a specialist in their field. Effective mediation does not just rely on good interpersonal and technical skills.

Budget constraints

Budgetary factors may be influential in choosing a mediator but companies should remember how much choosing a poor mediator can cost them if a resolution cannot be found and a dispute ends up going to court. This is why it is important that businesses weigh up the costs of choosing a particular mediator against the likelihood of bringing the dispute to a conclusion that will satisfy all parties involved.

For expert advice and representation through business disputes contact our specialist team of commercial dispute solicitors at Redkite, or complete our online enquiry form.

(1) Disputes: how a small business can handle them, https://firstvoice.fsb.org.uk/first-voice/how-a-small-business-can-handle-disputes.html

(2) The CEDR Mediation Audit, https://www.cedr.com/foundation/mediation-audit/

(3) Doing Business 2017, https://www.doingbusiness.org/en/reports/global-reports/doing-business-2017

(4) Alternative dispute resolution for consumers, https://www.gov.uk/government/publications/alternative-dispute-resolution-for-consumers/alternative-dispute-resolution-for-consumers

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.

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