When running a small or medium scale enterprise there is a positive expectation that business relationships between parties are successful and that opposite parties will live up to the word and spirit of business dealings agreed between the parties. When parties meet and agree to contract with one another it is mostly a very positive situation. Lots of oral assurances are made and there is a great deal of optimism at the creation of a business relationship.
However, as the business is transacted significant issues may crop up between parties, which may relate to various issues such as no proper delivery, substandard goods, delayed or no payment or other issues affecting the transaction. The parties then talk to one another to resolve these issues.
In spite of efforts taken by parties the issues can at times turn into disputes. At this time, one may contemplate taking legal action in respect of the disputes for recovery of dues, costs or losses caused.
In law, it is usually the obligation of the party to prove the existence of the facts of his case. For successfully proving ones case it is required to prove all the relevant facts, which one asserts. Hence, it is prudent practice to maintain good evidence in all the aspects of business transactions.
Upon the creation of a business relationship between parties it is advisable to put the terms and conditions of the business relationship in writing and signed by the parties. It is also advisable that the parties endeavour to ascertain the terms and conditions based upon the entire transaction. Sometimes problems arise from the fact that the entire transaction is not envisaged at the time of negotiating the transaction.
You could add a clause for disputes to be adjudicated by Arbitration i.e. under the Arbitration and Conciliation Act, 1996.
Even if this is not found initially to be necessary, then prior to executing the first part of the transaction one should deliver a written communication setting out the agreed terms and conditions of the business relationship and also stating that based on such agreement the transaction is being executed. As per the law in India, an oral agreement is recognized. However, an oral agreement may be very difficult to prove, especially at a stage when disputes have already arisen. Hence, it is judicious to put in writing the terms and conditions of an agreement by a formal written agreement, or alternatively by written communications setting out such terms and conditions.
During the course of conducting the business transaction, there could be a change in the terms and conditions of the business relationship for operational or practical reasons or even to accommodate the difficulties of the opposite party. These changes could be an exception to the initial terms or a modification of the agreement. Every time there is a change in the terms of the agreement, whether it is an exception to the usual terms or a modification of the agreement, the same should be put in writing between the parties. For practical reasons, these changes to the terms of the contract are usually discussed and agreed orally. However, it is advisable that such oral changes to the agreement be recorded in writing by written terms signed by the parties or by sending a written communication recording the agreed changes of the agreement.
Today, communication by emails is recognized in law to have evidentiary value in proving the facts of a case. Hence, good practice would be to put in writing all oral discussions and agreements between parties, and communicate the written record by email or otherwise to the opposite party.
It is prudent to have a proper acknowledgment or proof of delivery of all written communication to the opposite party. This is necessary, if the opposite party denies having received the written communication. It is best if the acknowledgment has the signature, name, date, time and stamp of the recipient. You could insist on all these details if there is a hand delivery made. There are email accounts which provide the delivery status of emails sent.
Maintaining these written agreements, communications, letters, emails and acknowledgements of receipt, is also necessary. Such written and recorded evidence will be of little use if there is no proper procedure in place for storing, filing and maintaining it. Emails can be maintained electronically i.e. in the email account, memory of computers or other storing devices. Emails could also be printed and appropriately filed.
The decision for taking legal advice and/or legal action is usually based on economic factors. It should be noted that the earlier you take legal advice the better. This may help taking remedial steps and informed decisions, which may put you in a stronger position or may even help in resolving the situation without having to take legal action.
Whatever is communicated by a client to his Advocate, in the course of or for the purpose of the engagement of the Advocate, is Professional Communication, which is confidential. Hence, it is most advisable to give complete information to the Advocate. In this way, an Advocate will give appropriate advice in the matter. Any weakness in your case could be exploited by the opposite party and hence it is best to be prepared for the same.
If legal recourse is inevitable, then the earlier you take action the better it would be. In appropriate cases you could seek interim relief against an opposite party. There are also alternative or other remedies, apart from filing a Suit in the ordinary Courts, like Arbitration (as mentioned above) and for action against unscrupulous management of Companies, registered under the Companies Act, 1956, you can also file a Winding-up Petition before the Company Court. Adjudication by Arbitration requires the prior agreement of parties, which is usually part of a written contract when the business relationship is created.
(Disclaimer – This Article is of general nature and not legal advice/opinion and not solicitation or advertisement for work. The Author will not be responsible for consequences, costs, losses or damages of any kind or nature, arising from the use of, or inability to use, the contents of the Article.)