TEO JENG YUA Commercial Dispute Has Started: What Should a Company Do First?
The period immediately after a commercial dispute arises — the first letter of demand, the first sign a counterparty will not perform, the first internal complaint that a contract has been breached — is often the most consequential. Decisions made, or not made, in those first weeks frequently shape how strong a company's position is by the time the matter is actually resolved.
Preserve the Record
Relevant documents and communications should be identified and preserved as soon as a dispute is reasonably anticipated, not once proceedings are filed. Gaps in the record — deleted emails, undocumented decisions, missing correspondence — are almost always used against the party that cannot produce them.
This includes internal communications, not just correspondence with the counterparty. Internal emails discussing the dispute, including candid assessments of the company's own position, are often discoverable and can materially affect the case if not handled carefully from the outset.
Establish the Legal Position
The underlying contract should be reviewed early for relevant notice periods, limitation periods, and any specified dispute resolution mechanism, such as a requirement to attempt mediation or refer the dispute to arbitration before litigation is commenced.
Limitation periods in particular are unforgiving — a claim that is factually strong can be barred entirely if not brought within the statutory time limit, and this should be checked as one of the first steps, not an afterthought.
Be Careful What You Say
Informal communications made before legal advice is obtained — an email sent in frustration, a verbal assurance made to placate a counterparty, an admission made to keep a relationship intact — can affect the company's position later, whether or not they were intended to be binding.
Decision-makers involved in a dispute should be briefed on this early: what to communicate, what not to communicate, and why even well-intentioned reassurances can complicate a legal position later.
Weigh the Options
Litigation or arbitration is not always the first, or the best, response. Negotiation, mediation, and, where the contract allows, expert determination can resolve a dispute faster and at lower cost, and are often worth exploring in parallel with preparing a formal claim or defence, rather than as an alternative considered only after proceedings have started.
- Preserve documents and communications, including internal correspondence
- Check limitation periods and any contractual notice or dispute-resolution requirements
- Brief decision-makers on communication risk before further correspondence is sent
- Assess negotiation, mediation or expert determination alongside, not only instead of, formal proceedings
Our litigation practice advises companies from the moment a dispute is anticipated, including preserving the evidential record, assessing the legal position, and weighing the available routes to resolution.
Getting these first steps right materially improves the range of options available later, whatever route the dispute ultimately takes.
This article provides general information about Malaysian law as a matter of public interest. It does not constitute legal advice and should not be relied on as a substitute for advice from qualified counsel on the specific facts of a matter. Laws and their interpretation change, and this article may not reflect the most current position.
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