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Dispute with a service provider - what should I do?

Many aspects of business dealings are about control – control of money, control of assets, and control of information – and a service contract is no different. When you appoint a service provider to render services to your business, that provider often holds control of certain assets or information – in the example of a web developer, your email and domain – and can theoretically revoke access to those assets or information if they choose to do so. A number of our clients have been burned by a prejudicial service contract, as well as the ensuing litigation.

We have many clients come to us complaining that a service provider has revoked access or suspended services over a dispute. In a recent case, a certain developer signed the client up for a monthly fee, then hiked up prices for further development, claiming that further development was not included in the scope of the work. It’s irrelevant whether it was or wasn’t – the damage was done, a dispute ensued and the developer shut down the client’s website.

So what should you do?

1. Get a proper contract

As in all business dealings, it is essential to get a written contract in place with a service provider. Far too many people neglect to put a proper written contract in place, relying instead on a verbal promise. The problem with this is that it is almost impossible to prove in court what the terms of the agreement were – resulting in more expensive litigation.

Even worse, many people simply sign a contract without reading it – perhaps assuming that the contract isn’t negotiable so there’s no point in reading it anyway – and land themselves in an unfavourable (or even unsolvable) legal position.

It is always wiser and cheaper in the long run to get our experienced contract attorneys to draft or review a proper contract for you – in fact, litigation often costs more than ten times as much as a proper contract.

2. Only work with proven, reliable service providers

Choose your service provider carefully, no matter what the industry. Consider their contract terms carefully. If they don’t have a proper written contract, are they worth working with? If their contract isn’t negotiable, should you rather consider another service provider? If the scope of the services isn’t fully set out, how will a dispute play out in future? Are they registered with an association or industry body?

3. Consider the impact of litigation

One should always consider the cost implications and expected return from litigation. This should inform your decision. If you are the innocent party, you may have no choice but to litigate against the service provider, but if you are the one in breach of your contract, it may well be better to abandon principle and ego – and pay what you owe.

What should you do if you find yourself in a dispute with your service provider?

If a dispute has already commenced, you may have to institute or defend litigation to protect your rights. You need to consider evidence like:

  • Can you prove that the service provider has not performed according to the agreement?

  • What does the service level agreement say about breach and performance?

  • Have you held up your end of the bargain? Have you paid what is owed?

In such cases, you should arrange a consultation with our commercial attorneys to determine the strength of your case, before the dispute gets out of hand.

Please note that this article represents a brief summary of contractual law, and is therefore meant for informative purposes only and does not constitute legal advice. For full legal advice on your commercial matter, please contact us to arrange a consultation.

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