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Corporate commercial disputes occur between the two parties (one of which is always a business entity) when one of them fails to fulfill their contractual responsibilities or fiduciary duties.
In most cases, commercial disputes between corporations and other business entities result from breach of contract and violation of fiduciary duty. There are also partnership disputes, intellectual property disputes, LLC members disputes, and non-compete clause disputes. Corporate disputes include antitrust, insurance coverage, product liability, and shareholder disputes.
Breach of commercial contract results from one party’s failure to pay on time, deliver the goods or services or substitute inferior goods or services. In conducting their everyday business, companies rely on contracts. They reasonably expect that the other party will fulfill its stipulated duties. Failure to comply with the terms is a cause of a commercial dispute.
In commercial relationships, one party often has to protect the interests of another party or entity. Such duty is called a fiduciary duty. If a board member of a large corporation fails to protect the interests of its shareholders, they have committed a breach of fiduciary duty. A shareholder can initiate court litigation to resolve the dispute.
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Although business partners most frequently share the vision of their future business operation, sometimes their different personalities, work ethics, and lifestyles get in the way. One partner believes that the other acts destructively to their business goals, jeopardizing their enterprise. Such belief gives rise to the corporate dispute.
The cause of intellectual property disputes is various violations of copyrights, trademarks, patents, and trade secrets. It is not rare that one business entity uses another business’s patent, violating their intellectual property rights.
Limited Liability Company’s members have various rights and responsibilities under the operating agreement. Sometimes their duties are not clearly defined in the company’s bylaws, which gives rise to a dispute.
Resolving a corporate commercial dispute in litigation is even more complex, expensive, and time-consuming than dealing with civil disputes. Often, that involves class action or multiple jurisdictions, further adding insult to injury.
Mediation proves to be the most suitable mechanism for resolving corporate commercial disputes.
Corporate commercial disputes litigation usually takes years due to its specific nature. Numerous pre-trial motions, complex discovery procedures, and expert witness testimonies cause a lengthy and expensive process.
Besides, litigation is an adversarial procedure aimed at winning the case. In such a scenario, one party is always the loser. That further disrupts business relationships and creates hostility between business partners.
Furthermore, undue publicity is necessarily involved in commercial litigation, which represents a significant setback in a business environment. Competition is eager to utilize the opponent’s weakness, including negative reputation stemming from dragging through the court. Therefore, confidentiality is key to resolving commercial disputes.
In mediation, a neutral third person resolves the dispute. The process is highly confidential. That means that, even if mediation proves unsuccessful, the information resulting from negotiations is not allowed in future litigation.
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Moreover, mediation is far less expensive and usually ends in several days. The mediator is a lawyer with expertise in the relevant field. Unlike mediators, trial judges lack specific expert knowledge critical to understanding commercial disputes.
Mediation is an informal and flexible method of resolving commercial disputes. However, a certain degree of formality is still necessary due to the complex nature of the conflict. Unlike other mediated disputes, the parties must present factual and expert evidence during the process.
The mediation procedure consists of a series of separate talks with each party privately (caucuses) that enable the mediator to estimate the possibility of settlement.
Following the caucuses, the mediator holds joint sessions where all disputed issues are open for discussion between disputing parties.
If the parties settle, they both sign the agreement enforceable as a binding contract.
Thomas Chase is a distinguished corporate law expert with a successful record as a commercial dispute mediator.
Call Mr. Chase today to find out how you can effectively resolve your corporate commercial dispute.