Disputes between entrepreneurs - methods of solving them

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Disputes between entrepreneurs related to non-performance or improper performance of contracts do not have to end with a case in a common court and a judge's judgment. You can try to settle it amicably by concluding an out-of-court settlement. There are also no obstacles to conclude it in court. You can also try mediation. It is always necessary to check the content of the contract, as it may regulate the methods of dispute resolution, e.g. provide that they will be dealt with by an arbitration court, not a common court.

Out-of-court settlement

The method of amicable settlement of the dispute is to reach a settlement. A settlement is a type of contract (Article 917 of the Civil Code) in which the parties make mutual concessions to each other. Mutual concessions of the parties do not have to be equivalent, and a settlement is effectively concluded also when - from an objective point of view - mutual concessions are not equally important, on the contrary - there are significant differences in terms of equivalence (judgment of the Court of Appeal in Warsaw of 6 March 2015, file reference number I ACa 938/14).

When concluding a settlement, it is worth entering in it what will be the consequences of the other party's failure to do so, e.g. what will happen if the debtor does not pay the installments for which he / she has been settled in the settlement.

The easiest way is to make the granted concessions conditional on the timely fulfillment of the settlement. You can enter in its content that it expires in the event of untimely performance, and the debtor is then obliged to repay the entire amount of the debt in the original amount, e.g. within 7 days from the date of delay in paying any of the installments. So here we are dealing with "automatism": failure to comply with the settlement automatically makes it ineffective.

You can also give up such automatism and secure the settlement in a different way. In the event of failure by the other party to comply with it, there may be a right of withdrawal.

The disadvantage of an out-of-court settlement is that it does not replace a court judgment. If the other party does not comply (e.g. fails to pay installments), it may be necessary to file a lawsuit with the court.

Court settlement

The vast majority of disputes between entrepreneurs can be resolved through a settlement concluded in court. Judges are even obliged to persuade the parties to conclude it (Article 233 § 1 of the Code of Civil Procedure). The content of the settlement is then included in the record of the hearing, and the parties sign it. The court may declare the settlement inadmissible only if it is inconsistent with the law or the principles of social coexistence or if it is intended to circumvent the law.

What are the advantages of reaching a settlement before the court?

  • quick conclusion of the dispute: the case before the court may drag on, even obtaining a favorable judgment in the first instance does not guarantee success, because the opponent may appeal to the court of second instance; a court settlement ends the dispute;

  • the settlement replaces a court judgment: a settlement concluded before a court has the same force as a court judgment: it is an enforceable title; This means that after the court has issued an enforcement clause (which is a formality), it may be the basis for enforcement by a bailiff;

  • recovery of half of the court fee: if a settlement has been reached, the court returns half of the court fee from the claim (if the settlement was concluded before the court of first instance) or from the appeal (if the settlement was concluded before the court of second instance).

Arbitration, or courts of arbitration

Instead of using state courts (i.e. common courts), you can take a dispute to an arbitration court. When?

First of all, it is necessary to check in the signed contract whether there is an arbitration clause in it. This is a provision from which it follows that the dispute will be resolved by an arbitration court. It must indicate the subject of the dispute or the legal relationship (i.e. a contract) from which the dispute has arisen or may arise. If there is such a provision in the contract, the dispute should be submitted to an arbitration court, not to a common court. Referral to a common court will result in the return of the claim if the other party (before entering the dispute) raises the objection to the arbitration clause.

As a rule, a specific, permanent arbitration court is indicated in the arbitration clause. Then the rules of this court apply. The amount of fees for accepting and considering a case is also specified in the internal documents of the arbitral tribunal.

If there was no arbitration clause, the consent of both parties will be required for the dispute to be resolved by the arbitration court.

What is worth knowing about arbitration courts?

  • an arbitration award has the same force as an award of a common court; after being granted an enforcement clause by a common court (which is a formality), it constitutes the basis for bailiff enforcement;

  • a case before an arbitration court may be shorter than before a common court - as a rule, arbitration is a single instance court (there is no appeal to a "higher instance arbitration court");

  • an arbitration award is difficult to challenge before a common court - only exceptionally, a common court may set aside such an award (e.g. contradiction to the fundamental principles of the legal order of the Republic of Poland, depriving of the possibility of defense before an arbitration court, failure to observe the basic rules of procedure before an arbitration court);

  • before an arbitration court, the parties may also conclude a settlement - it has the same force as a settlement before a common court.

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Disputes between entrepreneurs - or maybe mediation?

A mediator can also help in the amicable settlement of a dispute. A case may be referred to mediation on the basis of an agreement concluded between the parties, or when the dispute has already reached the court - on the basis of a decision of the court referring the parties to mediation.

The purpose of mediation is to bring the parties to an amicable settlement of the dispute and reach a settlement. The role of the mediator is to seek a room for compromise, to support the parties in formulating their settlement proposals. At the joint request of the parties, the mediator may also suggest ways to resolve the dispute. They are not binding on them.

Mediation is payable, so the parties must take into account its costs.

The mediator does not resolve the dispute. This is, among others mediation differs from arbitration. In the event of referral to an arbitration court, the parties submit to the court's decision - and it is binding on them. In mediation, the role of the mediator is to help the parties reach a settlement. But the mediator in no way can force or oblige the parties to an agreement.

If it is possible to reach a settlement before a mediator, then such a settlement, after its approval by the court, has the legal force of a settlement concluded before the court. A settlement concluded before a mediator, which was approved by giving it an enforcement clause, is an enforceable title, i.e. it may be the basis for bailiff enforcement.

The most important principles of mediation:

  • voluntariness:

the mediation will not take place without the consent of the parties; even if it was the court that referred the case to mediation, the party may effectively oppose it;

  • the mediator's impartiality:

the mediator is obliged to be impartial, and is also obliged to immediately disclose to the parties circumstances that could raise doubts as to his impartiality;

  • keeping mediation confidential:

the mediator, parties and other persons participating in the mediation proceedings are obliged to keep secret the facts which they learned in connection with the mediation; in the course of proceedings before a court or an arbitration court, it is ineffective to refer to settlement proposals, mutual concessions or other declarations submitted in mediation proceedings.

Trial before the common court

Of course, you can choose the most far-reaching solution and file a lawsuit against the contractor in a common court. Before that, he should be summoned to perform the service voluntarily.

Many entrepreneurs treat filing a lawsuit as a last resort, are afraid of the costs associated with it, and do not have sufficient legal knowledge to conduct a case on their own. However, waiting too long to take decisive action may even make it impossible to recover receivables.

It may turn out that the limitation period will expire in the meantime (for claims arising from business activities it is generally three years, but a number of regulations provide for even shorter deadlines, e.g. two years for claims of the seller for payment for goods sold as part of the enterprise.

The debtor's situation may worsen and too long waiting will result in him no longer having any assets from which effective bailiff enforcement would be possible.

What is worth remembering when deciding to bring a case to court?

  • a victory before the court of first instance does not end the case: the other party may appeal against the judgment of the court of second instance; more complicated cases, requiring expert opinions and the questioning of many witnesses, can drag on for years;

  • the claim fee is, as a rule, 5% of the value of the dispute; you also have to take into account additional costs, including on the opinions of experts, access by witnesses, lost earnings;

  • in simple cases for payment, it is worth using e-court: it offers the possibility of submitting a claim online, relatively low fees and quick obtaining of an order for payment, against which most debtors do not appeal; e-court is a good path for uncomplicated cases where the other party does not question his debt

  • as a rule, all evidence should be submitted in the statement of claim; omitting this may result in the loss of the case due to the failure to prove one's statements, when the court will not admit the evidence motions at a later stage, considering them to be late.