Considerations for how to manage disputes should be included in the contracts. Many companies will attempt to resolve issues using various means. Legal action, the least preferred option, is only considered after all other efforts fail.
Do Nothing and Sever the Relationship
Depending on the severity and consequences of the dispute, the buying organization might decide to do nothing and opt for another supplier when the parts or services are needed again.
Work to Preserve the Business Relationship
Severity, consequences, and number of occurrences are weighed against preserving the business relationship. For example, a material from a sole-source supplier is requested within a specific hour each day, and delivery is up to an hour late 10% of the time. In this case, the sole supplier might have the negotiating power, and it would be best to first focus on strengthening the relationship, particularly if non-performance is minor. Another view is sometimes the strength of the existing relationship between buying and selling organizations is enough to encourage both parties to discuss activities and non-performance.
Alternative Dispute Resolution
Arbitration, mediation, and more general dispute resolution methods might expedite the time and cost of resolution versus going to court. The purpose of alternative dispute resolution methods is to find a mutually agreeable solution for both parties. The details regarding dispute resolution should be included in the standard terms and conditions of an agreement and approved by the buying company legal team. The buying team should be aware the selling company might have their own dispute resolution
Litigation
Litigation should be considered only as a last alternative when other methods to resolve disputes have failed. In addition to time and money required for litigation, the business relationship might also be altered.
