For the benefit of your clients, you should attempt to avoid disputes arising in a sale of business transaction. Common causes of dispute are:

Client expectations

Many clients believe that a sale of business should be quick, easy and cheap. When reality sets in, the client may blame the other side or their advisors. To short-circuit this, clients should be given realistic advice at the outset.

Agents

Where communication between the parties is via a business agent, misunderstanding may arise. Direct discussions between the vendor and the purchaser can often overcome these problems.

Disputes between exchange and settlement

Once contracts are exchanged, disputes which cannot be resolved may end up in court. This possibility can be reduced by minimizing the period between exchange and settlement.

Dispute resolution clauses

Expert determination

It is a good idea to include provisions in contracts to refer specified types of disputes for determination by an independent person with expertise in that field. This involves submitting documents to the expert, who makes a decision without any meetings or hearings. This provides a quick, inexpensive resolution of such disputes.

Conferences

Clauses in some precedent documents require the parties to follow a procedure, including meetings of executives, prior to taking any other step to resolve a dispute. If a party will not attend a meeting without contractual compulsion, the meeting is probably doomed to failure. Accordingly, such provisions are usually a waste of time and money except as a guide to parties to adopt sound process.

See Avoiding and resolving disputes.

Mediation

If both parties in the mediation process wish to resolve a dispute, a settlement will usually emerge. This typically involves:

Mediation agreement

This is provided by the mediator, and covers the mediator’s fees and the confidentiality of the mediation process.

Position papers

Each party provides a short statement of their position on the dispute.

Opening meeting

On the day of the mediation, the mediator sets the scene by pointing out the advantages of reaching an agreement, and getting the parties to state their positions.

Shuttle diplomacy

Immediately following the opening of the meeting, each side goes into separate rooms, and the mediator shuttles between them, encouraging and conveying offers to move towards settlement with or without joining meetings to supplement the shuttles.

Accord

If the parties reach an accord, the accord is documented to bind the parties as an agreement.

Arbitration

This involves an arbitrator imposing his or her determination on the parties. The steps are:

Arbitration agreement

The arbitrator provides an agreement covering the arbitrator’s fees, the procedure, and that the arbitrator’s decision will be binding.

Preliminary hearing

This is a meeting (or meetings) to lay down the procedure and fix an arbitration date.

Preparation of documents

The parties are required to submit a series of documents similar to court pleadings.

Hearing

An arbitration hearing is conducted, following procedure very similar to a court.

Costs

Costs are incurred and awarded by the arbitrator in the same way as a court case. However, the parties have the added burden of paying the arbitrator, and paying for the room and facilities.

Timing

An arbitration can be concluded within a few months, which can be faster than a court case.

Choosing the mediator or arbitrator

If the parties cannot agree as to who should act as mediator or arbitrator, there are several organizations which provide this service including:

• Australian Commercial Dispute Centre;

• LEADR; and

• Law Societies of a state.

See Mediation and arbitration.