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Alert: Litigation threat for food companies

Author : By Rebecca Tinham, head of dispute resolution, Vertex Law

21 July 2010

With companies more likely to take legal action than they were a year ago, food & beverage sector businesses should take advice as soon as they know a dispute is looming

When times are good, the business environment is more benign. But once money becomes scarcer, suppliers become more aggressive in demanding payment and customers find fault in products provided. Matters can soon end up in court.

Litigation is stressful and potentially very expensive. Early mistakes can come back to haunt you. If you suspect a problem is brewing, think hard about what you put down in writing. Internal company e-mails are subject to disclosure rules so are likely to end up in the other side’s hands. So, even if marked private and confidential, do not assume e-mails will remain that way.

Once the sides start corresponding with each other, more and more information is on record and it is easy to box yourself into a corner by inadvertently saying the wrong thing. But if you take advice early, your lawyer will guide you on what you should and should not say, leaving you more room to manoeuvre if the dispute escalates further.

Once the other side is aware you have instructed lawyers they will do likewise and be on their guard. But you do not have to show your hand. Your legal advisers can remain very much in the background, albeit guiding you every step of the way.

By the time the other side brings in their own lawyers they may have inadvertently done so much harm to their legal position that their case is gravely weakened. It is far better for your business, your finances and your stress levels to try to settle early – so be honest with yourself and your lawyer.

Once your lawyer has analysed your legal position, look dispassionately at the strengths and weaknesses of your case. Between you, think ahead and try to predict how a judge would view the conflicting claims.

Even if you think you have a cast-iron case, you may still be better served by accepting a reasonable out-of-court settlement. If your lawyer thinks you are in a weak position, then you have to face facts. Again, try to settle early – if nothing else it could save a small fortune in legal fees.

And on the subject of money, make sure your lawyer is candid about what you will be charged. In such a fluid situation, it is almost impossible to give a fixed cost but ballpark figures are possible, as are regular updates and estimates of forthcoming fees.

Finally, try to reduce the likelihood of litigation in the first place by having clear terms and conditions with your suppliers or customers that spell out what each expects of the other.

Rebecca Tinham can be contacted at rebecca.tinham@vertexlaw.co.uk or on 01732 224000


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