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Disputes are stressful and distract you from the day-to-day running of your business. They’re often about things that affect your business’s bottom line, such as:

  • unpaid invoices
  • the quality of work or goods
  • a clause in a contract.

A dispute can happen between different parties, such as a contractor, hirer, customer or supplier.

Disputes happen for many reasons. For example, a misunderstanding or different expectations about the results of the work.

Planning and good communication can reduce the risk of a dispute. But if you do end up in a dispute, there are ways to manage it and support services that can help you.

Prevent disputes

Getting your contract right at the start of your relationship with another business will mean fewer problems later.

Doing these things may help you avoid a dispute:

  • talk to the other party and agree on how you’ll deal with a range of situations that might happen during your business relationship. Developing good relationships means you’re more likely to avoid disputes or resolve them early
  • write a contract so you don’t rely on memory about what you’ve agreed to
  • read your contracts before you sign them and make sure everything you’ve agreed on is in the document
  • know what the contract obligates you to do, including any national, state or territory laws you’ll need to follow
  • develop a customer complaint process and train your staff
  • get a lawyer or business adviser to check your contract and processes to reduce the risk of a possible dispute.

Steps to manage your dispute

Use these steps to help you informally manage and resolve your dispute:

  1. Understand the dispute – check your facts and identify your priorities and the results you’d like.
  2. Talk to the other party – prepare for your discussion and keep a record of what you talk about.
  3. Write to the other party – send a letter giving them a chance to fix the issue before you take further action.

Example of how to manage a dispute

Maria pays Lachlan to clean the offices of Rekall Ltd. Lachlan’s contract is for 7 hours every Saturday. 

On Monday, Maria found that Lachlan hadn’t vacuumed her office. Maria assumed that Lachlan hadn't cleaned any of the offices, so she didn’t pay Lachlan’s next invoice.

Lachlan hadn't cleaned Maria's office that Saturday. But this was because he spent extra time cleaning a room where there had been a company party. This meant he couldn’t clean every office in 7 hours. Lachlan assumed Maria knew about the party and didn't tell her about what had happened.

It was a surprise to Lachlan when Maria didn’t pay his next invoice. He called her and explained what had happened. They agreed to keep each other informed of any future issues that might affect the terms of the contract. They were able to resolve the problem and Maria paid Lachlan’s invoice without him having to lodge a formal dispute.

Get help to resolve your dispute

If talking and writing to the other party hasn’t resolved the dispute, you can take a formal approach:

  • Ask for help from a third party – consider alternative dispute resolution (ADR), contact a lawyer or hire a debt collection service.
  • Go to court or a tribunal – keep in mind that it’s expensive, time consuming and you won’t control the outcome.

Which option you use depends on the outcome you want. For example, using ADR can help you preserve your business relationship. It can also be cheaper and less stressful than going to court.

However, if you just want to get your money or end the contract and move on, going to court or a tribunal might be better. But they may make you try ADR first.

Alternative dispute resolution (ADR)

ADR uses an impartial third party, such as a mediator, to help both parties reach an agreement about a dispute.

The main types of ADR include mediation, conciliation and arbitration. But there are others.

ADR may help you resolve your dispute before it becomes so big that a court or tribunal gets involved. You can use ADR before, during or even after a court process.

ADR:

  • is faster than going to court
  • saves you money
  • is flexible and informal
  • gives both sides more control to focus on what’s important to them
  • is usually confidential
  • offers more creative solutions
  • helps you preserve your business relationship.

Costs of ADR

The cost of ADR depends on:

  • the type of ADR you choose
  • your ADR practitioner’s experience and expertise
  • how complex your dispute or contract is
  • your state or territory
  • whether you live in a capital city or a regional area.

ADR costs may include:

  • practitioner's fees 
  • travel costs, such as hotels and meals, if you or the ADR practitioner need to travel to the session
  • room hire fees, which both parties usually share
  • other costs, such as postage or photocopying.

Mediation

Mediation is a type of ADR that’s popular with businesses. It’s a confidential and informal process.

During mediation, an ADR practitioner (the mediator) guides you and the other party to:

  • listen to each other’s concerns
  • pinpoint which issues are in dispute
  • come up with a range of solutions
  • reach an agreement that you can both live with.

If you don’t reach an agreement, you can have further mediation, use other types of ADR, or to take the issue to court.

Example of the mediation process

Caryl is an interior designer and contractor. Serge is the owner of a boutique hotel. They’re in dispute about payment of Caryl's invoice – it’s greater than the amount she quoted.

Caryl doesn’t want to damage her working relationship with Serge as there’s potential for work on other hotels he owns. Serge is happy with Caryl's work and would like to hire her again, if they can resolve the dispute.

Serge and Caryl agree to use ADR and choose mediation. At the session they’re both given the opportunity to explain their side of the dispute. The mediator tells them to listen to what the other has to say and not interrupt each other.

Caryl explains that the invoice is more than the quote because the job was much more involved than she first thought. Caryl acknowledges that once she knew this, she should have got approval from Serge before continuing with the work.

Serge listens to Caryl and offers to pay her account if she reduces it by 10%. Caryl agrees to Serge’s offer. They put the agreement in writing, consider the dispute resolved and hope to work together again soon.

Franchising disputes

Businesses involved in a franchise agreement must follow the Franchising Code of Conduct’s process for managing disputes.

Under the franchising code, you must first try to resolve the dispute with the other party in writing. If you can’t resolve the dispute in 21 days, you can then refer the dispute to an ADR process or voluntary arbitration.

The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) or a state small business commissioner can help you with your franchise dispute.

 

Resources to help you resolve a dispute

The Australian Business and Family Enterprise Ombudsman website has:

The Fair Work Commission gives free legal help to eligible employees and employers.

You can use the Workplace Advice Service for employment issues that involve:

  • dismissal
  • general protections
  • bullying at work
  • sexual harassment at work.

Check with the small business commissioner in your state for advice, support and low-cost or subsidised mediation:

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