Contractual relationships are the heartbeat of business and commerce, yet given the volatility of economic and geopolitical conditions in Bangladesh after the regime change last year in August 2024, contractual disputes are common and very often courts are not the best answer. Since the regime change in Bangladesh in August 2024, the issue of how to deal with the commercial contractual dispute requires renewed focus.
The first point of consideration is to critically assess the contract itself - Is it written or oral? Is it registered or unregistered? If written and registered then was it an entire agreement or was there a variation?
Oral contracts
In the event it is oral then invariably one needs to settle the actual terms of the contract. A starting point would be to turn the oral contract into a written contract as soon as there is any possibility of dispute. So it is prudent to write them down and propose to the counterparty to agree on them. If there is no agreement then contemporaneous evidence such as correspondence - text messages, social media platform messages, and letters can be very useful to indicate what was agreed. Sometimes bank account withdrawals or deposits can show a party acted in a way that alludes to a contract. However, these will be circumstantial evidence. Also, first-hand accounts of actual witnesses can amount to testimony as well. Subject to how good a witness is, oral contracts can be proved by witness evidence.
Written and registered contracts
If the contract is written then it needs to be seen if the contract is registered or unregistered. There is a practice in Bangladesh that contracts are drawn up on 300 taka government stamp paper and signed which is assumed to be the end of the job. However, it is not, as the best contracts upholdable by a court of law are those which are written, drawn up on correctly valued stamp paper, and which had been registered before a public authority. Contracts concerning land must be registered at the Sub-registrars. However, contracts such as tenancy agreements, employment relations, and buy and sell agreements can be registered as well by being drawn up on a properly valued stamp paper and then notarised before an accredited lawyer.
In the event the contract is unregistered then it still has evidential strength given there is supporting evidence that parties have acted per the terms. Such as if an employee is disputing non-payment of wages then even if the employment contract is unregistered, provided there is evidence of regular payout or the employee name is in work rotas, then the evidence demonstrates that indeed there was an employment relationship and wages are more likely to be owing than not.
Breach
After analysing the actual type of contract, then one needs to consider what term was breached. Who did what which is alleged to have been a breach? Why did that party act in such a way? The most common allegations are lateness of service or product delivery, non-performance, and non-payment. Evidence showing these concerns should be collected and organised. Once compiled the first course of action is to write an informal letter/email/communication highlighting the breach. If there is no response can there be a meeting with the person? The idea should be to get acknowledgment of the breach and then initiate a discussion on rectifying the error.
If the other party accepts the breach then the party can rescind and negotiate a new deal (advised). If on the other hand, the other party does not accept the breach and this is especially the case for large amounts of imported goods from Bangladesh which unfortunately does not meet the permissible quality control levels. In such a case then evidence such as quality control reports, statements, and pictures can help establish the breach and the party can demand a discount on more products or a credit note.
Non-payment of money
One of the most common problems in contractual relations is non-payment. Repayment of commercial loans is a regular feature among businesses. There is non-payment of money amount by suppliers. The political landscape had been shaken so much since last summer with the government of 16 years being ousted forcibly from power, that the vacuum created by the change riddled the business and banking community with uncertainty.
There is currently no announcement on the next democratic elections and the lack of reliable democratic systems is exacerbating the economic problem despite the good intentions of the interim government. Coupled with the political situation there is an even more dire situation in the lower courts, with judges being transferred infrequently across the country. In such a situation threatening legal action is not advised, as a party is unlikely to see it through the court system as litigations can be quite treacherous affairs spanning years. Alternative to litigation such as a lower compromise and/or credit note or refunds can be particularly useful to tie up the loose ends of a deal gone wrong.
Possible solutions
Subject to of course the limitation period one can consider waiting to proceed with litigation as both the political and court situation are unsupportive at the moment with prospects of more stability after a general election.
Parties can also insist on the post-dated cheque to ensure payment between small businesses or between individuals. Sophisticated entities such as incorporated businesses, can also consider banking avenues such as payment guarantees, letters of credit, and security bonds with a future maturity date to ensure payment.
Another useful avenue is to make inquiries into the personal assets of the offending party. It is good to have the awareness and make inquiries at public bodies such as land offices, Registrar of Joint Stock of Companies (RJSC), or even at the tax circles where individuals have to submit year tax returns. Often knowledge of the personal assets of an individual can be particularly helpful in motivating them to resolve a contractual dispute more proactively than to delay and be evasive.
Ultimately it will come down to whether the parties wish to remain in business together or if they wish to depart from a business relation. If there is a genuine willingness to remain in business then navigating through small differences by negotiation and communication is a more practical and sustainable way forward than litigation. If however parties simply want an exit from the relation and recoup huge losses then a more heavy-handed strategy can be used to motivate the offending party to recompense for the loss caused by the breach.
The key to resolving a contractual dispute is to understand the actual contract, keenly appraise the breach to note its underlying causes, and seek appropriate fact-specific recompense. All these elements are fact-specific and will vary from case to case. Unfortunately, the political and judicial landscape is unsupportive at the moment and parties will have better prospects of resolution by going beyond the traditional routes of dispute resolution and by focusing more on the contractual relation than by looking away.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
