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Keeping good relations with contractors is essential for every small business. Disputes with contractors arise and can cost your business valuable time and money if they are not resolved quickly. You should try to handle a dispute with a contractor to avoid:

  • long-term damage to your business or your relationship with the contractor; and
  • the need to go to court.

This article will guide you through the steps to deal with a dispute with a contractor to minimise the impact on your business.

Check Your Contract

The first step to resolving any dispute with a contractor is to carefully review your contract. If you do not have a formal written agreement, review any emails or other correspondence between you and the contractor regarding the work provided. This correspondence may amount to a binding agreement.

For example, you may have email correspondence that sets out:

  • pricing;
  • the scope of work; or
  • any relevant timeframes.

Keep in mind the issues in dispute when reviewing your contract or correspondence. If you are unhappy with the goods provided or services performed by the contractor, read the wording of any clause relating to their obligations regarding goods or services to check if they have breached your agreement.

You should also check if your contract includes a dispute resolution clause that sets out the steps the parties should follow if there is a dispute. If the matter ends up in court it can be helpful to show that you followed this procedure.

Communicate and Negotiate

You may be able to resolve most disputes with contractors by keeping the lines of communication open and negotiating a settlement. This is the most efficient way to settle a dispute with the least impact on your business. You are more likely to end up in expensive and time-consuming legal proceedings if you do not communicate and listen to the contractor. You should approach any negotiations calmly and professionally and be prepared to compromise.

During negotiations, clearly communicate to your contractor:

  • the issues in dispute and, if relevant, what you believe they have done or failed to do; and
  • how you want the contractor to fix the issue, including a specific timeframe.

Give them the chance to respond.  Often, disputes are the result of misunderstandings or miscommunications that can be solved by open communication. This approach will most likely keep your relationship with the contractor alive.


If you cannot resolve the dispute by communicating with the contractor, you may need a third party to assist with more formal negotiations. Mediation is a process run by an independent person (the ‘mediator’) to help parties work through the issues in dispute. Any agreement reached by the parties can be confirmed in a written agreement that is then binding. The agreement should:

  • include the terms of the resolution; and
  • be signed and kept by both parties.

Mediation can be a cost-effective option to settle a dispute without going to court.


Arbitration is another form of dispute resolution that you and a contractor can use to attempt to settle your dispute. It is a more structured process than mediation, but it is less expensive and formal than court proceedings. It can only take place with consent from both parties. An independent ‘arbitrator’ acts as a judge to determine a result. This result can be binding on the parties and is enforceable, similar to a judgment of the court. Because of this, you should seek legal advice before agreeing to an adjudication.

Unlike court proceedings, the parties can choose how to carry out the process. This may depend on the circumstances of the dispute. For example, the parties may decide together whether any evidence is required.

Go to Court

Court proceedings, or litigation, should be your last resort. Going to court is time-consuming and expensive. There is also no guarantee you will be successful, even if you believe you have a strong case. You can represent yourself in court, or at a lower tribunal like the NSW Civil and Administrative Tribunal (NCAT). However, a lawyer will be able to advise you on the strengths of your case and how best to present your position and evidence. You may also be disadvantaged if the other party has a lawyer and you do not.

If you are successful, the magistrate or judge will make a judgment against the contractor. They may order that the contractor pay your legal costs. However, if you are not successful, the court may order you to pay the contractor’s legal costs. If you intend to go to court, you should seek legal advice on your prospects of success.

Key Takeaways

You may be able to resolve many disputes with contractors quickly and easily by clear, calm communication and keeping an open mind. Follow the steps set out above to attempt to resolve the dispute before the situation escalates. If it does, you may need to use alternative dispute resolution processes or even take legal action.  A lawyer can advise you on the best course of action for your business.

If you have any questions about dealing with a dispute with a contractor or need assistance in resolving a commercial dispute, contact LegalVision’s dispute resolution lawyers on 1300 544 755 or fill out the form on this page.


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