What is a commercial dispute?
A commercial dispute, is a conflict or a disagreement between persons in a commercial
relationship. The conflicts mostly arise from failure by one party to perform the contract terms
and conditions. Particularly, poorly drawn contracts present an avenue for disagreements because the parties rights and obligations may not be clear.
Examples of Commercial disputes
Commercial disputes are diverse because they may arise between individuals and business
entities. They also vary in size and complexity. Commercial disputes may include:
1. Supply chain disputes
These may include failure to supply ordered goods or services, non-payment of agreed fees or
purchase price, supply of faulty goods or poorly performed services which don’t meet the agreed
specification.
2. Shareholders/directors/Partners disputes
Common disputes between shareholders, directors or business partners include failure to perform
obligations, breach of fiduciary duty, misuse of business funds, misunderstandings on the role of
each party, division of business funds or assets, poor performance by either party, fraud,
subjecting the business to risks, breach of trust etc.
3. Fiduciary Disputes
Parties in a business relationship undertake to act in good faith for the best interest of their
businesses failure to which disputes are likely to occur. Failure to act in good faith may include
disclosure of confidential information, non-disclosure of material facts during negotiations and
failure to comply with terms of a contract with an intention of frustrating the contract.
4. Real estate disputes
Real estate disputes involve disagreements related to property contracts. They include unfulfilled
terms of a lease agreement, conflict between developers and property owners, landlord-tenant
conflicts, breach of loan agreements where a property has been charged by a financial institution,
damage to property etc.
5. Intellectual property (IP) disputes
IP disputes include IP infringements of copyright, patent and trademark licenses, passing off, IP
ownership, IP misuse etc
How should commercial disputes be resolved?
Disputes may be resolved through courts of law, commonly known as litigation or through
alternative disputes resolution (ADR) mechanisms. In Kenya there are various forms of ADR
which include negotiation, conciliation, mediation and arbitration. Although for a long time
arbitration has been used to resolve many commercial disputes in Kenya, mediation is becoming
a more favorable form of ADR. The mediation process involves assigning a neutral third party or
“mediator” to work with the parties in an attempt to reach an agreement or compromise. The
process is faster, confidential and besides resolving the disputes it helps the parties to retain their
relationship and continue doing business together.
Unless addressed in the right manner, commercial disputes can escalate and subject
the business to grave loss. As a result of unresolved or poorly resolved disputes
many businesses have collapsed and others suffered significant financial and
reputation loss. While legal support is not mandatory in resolution of commercial
disputes, working with a legal expert is highly recommended. The expert will assist
a business owner in analyzing the dispute and choosing the most appropriate mode
of resolving the dispute.