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What is a Commercial Dispute?

No business wants to be involved in a commercial dispute. Commercial disputes can arise out of a variety of situations, from contract violations, intellectual property infringement, or any number of other situations that result in the potential for legal action for the business clients and parties involved. The wide range of events that can give rise to a commercial dispute makes it a common occurrence for many businesses to encounter. In this article, we’ll provide some basic information about what a commercial dispute is, and when you should hire an attorney. We’ll also outline what you might reasonably expect in a commercial dispute if you do choose to hire a lawyer to represent you.

The reality is that although commercial disputes are common and can arise for a variety of reasons, due to the potential impact stemming from commercial disputes it is almost always in your best interests to consult with a commercial litigation lawyer. The financial or reputational harm that can accompany a poorly navigated commercial dispute is often difficult to calculate, but can be extensive. Avoiding this type of negative outcome is a top priority for businesses and the commercial litigation attorneys that represent them.

Common Types of Commercial Disputes

Many individuals who operate their own business may wonder what a commercial dispute entails. The answer is both simple and complex. The simple answer is that a commercial dispute is any dispute between two business entities. However, this brief answer fails to capture the complexity that can surround commercial disputes. Commercial disputes can happen for a number of reasons, and vary incredibly in complexity. Let’s look at some of the more common types of commercial disputes.

Breach of Contract

A breach of contract occurs when one or more parties involved in a contract fail to meet their obligations or responsibilities as outlined in the contract. Contracts play a central role in commercial transactions and dealings. Because of the centrality of contracts in commercial operations, contract violations are a common reason for commercial disputes. One party may feel that the other party failed to live up to the obligations outlined in the contract, and may, therefore, wish for some remedy. There are different types of breach of contract, including whether the breach is considered minor or material. The degree to which a contract was breached is a deciding factor when this type of commercial dispute is settled.

Intellectual Property Infringement

Intellectual property rights play an important role in our technology-driven world and are foundational to the continued financial success of many businesses. Intellectual property infringement may involve trademarks, patents, copyrights, and trade secrets among other things. Increasingly, intellectual property includes things that are not tangible in the real world, such as ongoing research. Despite this, there exist protections for companies that feel that their intellectual property has been stolen or used without their permission. Disputes over intellectual property occupy an ever-increasing role in commercial litigation.

Breach of Fiduciary Responsibility

A breach of fiduciary responsibility is a third common type of commercial dispute. Fiduciary refers to a relationship that involves trust or responsibility. There are many fiduciary duties that are relied on in a commercial setting on a daily basis, including the duty to act in good faith, to maintain confidentiality, or to fully disclose information. A breach of fiduciary responsibility can encompass a wide range of activities, but at their core all such breaches center around one party failing to live up to the duties and responsibilities that he or she is legally or contractually obligated to perform. For example, if two partners in a commercial enterprise fail to deal with each other fairly, there may be a breach of fiduciary responsibility.

Similarly, if the director of a corporation fails to adhere to his or her responsibilities to shareholders, he or she may be in violation of fiduciary responsibilities. There are many ways to breach fiduciary responsibilities, including omitting key information, misuse of one’s position, or a failure to disclose certain information.

Alternative Dispute Resolution

If two commercial entities have a dispute, chances are some form of Alternative Dispute Resolution (ADR) will be attempted to bring about a solution to which both parties agree. If one commercial enterprise has a dispute with another, it may choose to bring the other party to court. Litigation can be extremely costly for both parties involved, which makes ADR an attractive choice in commercial disputes. Aside from cost savings, there are other tangible benefits to pursuing ADR rather than moving forward with complex litigation. During dispute resolution, the involved parties will be able to participate more fully than they would through traditional legal methods. Through this participation, the involved parties in the dispute have greater agency to shape the outcome of the dispute resolution process.

Arbitration and mediation are the most common forms of ADR utilized to settle a commercial dispute. Both arbitration and mediation may be preceded by negotiation between the parties in the dispute. Aside from the fact that both arbitration and mediation can save both parties in the dispute substantial amounts of time and money when compared to litigation, there are some key differences between these two processes that are also worth understanding.

Mediation

Mediation is a process that takes place outside of the legal system between two private parties in a commercial dispute. It should be noted that while mediation can be mandated in the course of litigation to bring about a resolution to a dispute, mediation can also occur between two private parties without any mandate by the court. In mediation, the two parties involved in the dispute are brought together to attempt to resolve the dispute with the help of a mediator, who is a neutral third party charged with facilitating discussion and resolution.

Mediation differs from arbitration in that the mediator cannot make a binding determination regarding the dispute. Rather, in mediation the two parties themselves must come to an agreement on a resolution to the dispute with the assistance of the mediator. While not all mediations are successful, this can be an attractive option for reducing the costs associated with litigation and bringing about a timely resolution to a commercial dispute.

Arbitration

Arbitration is a second common form of ADR used in commercial disputes by parties who wish to avoid the costs and time associated with litigation. In arbitration, both parties present their side of the case to a neutral third-party, referred to as an arbitrator. In order for arbitration to occur, both parties must agree to the terms of the arbitration. The arbitration may be before a single arbitrator, or multiple individuals in that role.

In form, arbitration is a less formal version of a trial. Both sides will make a statement before the arbitrator, and provide evidence that supports their respective positions. In some cases, there may be a limited form of discovery during arbitration, however, it is important to note that arbitration differs significantly from litigation in that the parties may not need to follow rules of evidence applicable in court. Once the arbitrator has listened to the statements made by both sides and reviewed the evidence, he or she will then issue a decision. The ability of an arbitrator to make a final determination in a commercial dispute is the most significant difference between mediation and arbitration, although the form of the two processes is different as well. The decision made during arbitration may be binding, in which case it will be legally enforceable and upheld by the court.

Final Thoughts

Commercial disputes can encompass a wide range of activities, from breach of contract to a breach of fiduciary responsibility and beyond. Commercial disputes are, at their core, centered around a disagreement between two business entities. How those entities settle their dispute is often largely up to the parties involved in the dispute themselves. Although many parties that are involved in a commercial dispute may believe that litigation is their only recourse, there are a variety of mechanisms that can be used to settle commercial disputes. Among these are arbitration and mediation, both of which offer the benefit of being far less costly and time-consuming than going to court. Additionally, these vehicles for dispute resolution can give both parties more control to shape the outcome of the dispute.

Although an attorney is not always required to resolve a commercial dispute, it is in your best interests to consult with a qualified commercial litigation attorney both before and during the process. The best defense against a commercial dispute is to avoid the dispute entirely. For example, a breach of contract dispute can often be avoided by utilizing a skilled attorney to draft the contract in the first place. If some form of dispute resolution must take place, whether it be mediation, arbitration, or litigation, a commercial litigation attorney will be able to guide you through the process and ensure that your best interests are being represented at all times. If you are involved in a commercial dispute, contact the experienced commercial litigation attorneys at Bremer Whyte Brown & O’Meara, LLP.