Today our UK expert breach of contractbreach of contract: in contract disputes, one contracting pa... More lawyers discuss how to recover compensation for wasted management costs following a breach of contract.
Commercial disputes can be costly and time consuming for businesses. Frustratingly, even where businesses successfully achieve financial compensation for their direct losses arising out of a breach of contractbreach of contract: in contract disputes, one contracting pa... More, there is considerable indirect cost because considerable management time is occupied with pursuing the claim. However, businesses can take steps to recover damagesdamages: in litigation and dispute resolution, financial com... More for lost management time. Let’s take a look.
Prove your loss
To make a claim for lost management time, a business must be able to prove that the loss is “significant”. That is, the breach of contractbreach of contract: in contract disputes, one contracting pa... More caused such a significant disruption to the business that its staff were engaged in managing the loss rather than concentrating on usual trading activities. Whether loss is “significant” is considered by the court on a case-by-case basis. The business must be able to demonstrate that its employees were diverted from their normal activities to investigating or managing the breach of contractbreach of contract: in contract disputes, one contracting pa... More. This is where record-keeping is invaluable. If, for example you find that you are working extra hours to bring in a new client to compensate for losses arising from a breach of a restraint of traderestraint of trade: a restriction on a party’s right to ca... More, you should keep accurate records of the time you spend on that work. Brief notes of the exact nature of the work done will help validate your records. Contemporaneous records are more reliable than records made after the event. Good records are of invaluable assistance to your legal representative and will aid them in better formulating your claim as well as increasing your prospects of success.
It is also important to remember that a business claiming losses for breach of contractbreach of contract: in contract disputes, one contracting pa... More must take steps to minimise its losses. A court will not compensate a business for taking unnecessary or expensive steps, such as contracting temporary staff, if it finds that a business was able to achieve the same result with using existing resources.
Explain your loss
You need to be able to explain how you’ve arrived at your claim. Again, this is where records are invaluable. You may find yourself in a situation where you are not aware of the breach, or extent of the breach, and records may be the last thing on your mind. Your ability to verify your claim will not fail if records are not contemporaneous and you should use your best efforts to keep adequate records once you are aware of the relationship between the breach and your management losses.
Your claim needs to be accurate, clear, and based on your actual losses incurred. You cannot, as part of a claim for wasted management time, include any component for loss of opportunity for employees who would have been generating profits had the breach not occurred. That is a different type of claim to the claim we are discussing in this article.
Be clear about your obligations under the contract. In an ideal world, breaches of contract would not occur. However, they do. We have already looked at some of the steps your business should take when faced with a breach. There are also some things your business can do to ensure you act swiftly in the event of a breach.
- Know your obligations – are there any time limits for giving notice under the contract? What about the interests of third parties? If necessary, keep a simple outline of your business’ obligations under the contract around the time of negotiations taking place. Simplified information available at your convenience will save you significant time in refreshing your memory about the contract, what your obligations are and any provisions of the contract which may seem ambiguous or difficult to understand.
- Records, records, records – detailed records made contemporaneously, or as soon as practicable following the events, are of great benefit. Records may record the following:
- Time spent and hourly rates of employees.
- Reasons why you have selected specific employees to carry out management work.
- Explanations of the work those employees would ordinarily have done.
- Explanations of how the breach has damaged your business’ usual trading activities and productivity.
To find out if your business can claim compensation for its lost management time where a breach of contractbreach of contract: in contract disputes, one contracting pa... More has occurred, speak to our specialist breach of contractbreach of contract: in contract disputes, one contracting pa... More solicitors or commercial litigation solicitors. You can contact us for a confidential discussion today.