In the context of litigation and dispute resolution, standstill agreements can be a highly effective tool for prospective litigants. They often facilitate resolution without immediate recourse to the courts and are particularly valuable where statutory limitation periods are approaching.
1. Purpose of Standstill Agreements
The primary objective of a standstill agreement is to suspend or extend statutory (or contractual) limitation periods. Most commonly entered into before court proceedings are issued, these agreements offer several important benefits:
- Avoiding protective proceedings: Claimants are not required to issue proceedings purely to protect their position, resulting in potential cost savings.
- Creating space for negotiation and ADR: The parties can continue negotiations and explore alternative dispute resolution (ADR) options without the pressure of an imminent time-bar.
- Enabling informed decision-making: Additional time allows both sides to assess the merits of their respective claims and defences more thoroughly, supporting better strategic decisions and more accurate costs budgeting.
2. Key Parameters to Consider Before Finalising a Standstill Agreement
A carefully drafted standstill agreement will typically address:
- The mechanism for re-starting the limitation period (including notice requirements);
- Any agreed long-stop date; and
- Circumstances in which proceedings may be commenced while the agreement remains in force.
Before entering into a standstill agreement, each party should assess its potential impact and seek legal advice to ensure a full understanding of the implications.
3. The Importance of Careful Drafting
Precision in drafting is critical. Clear and unambiguous wording ensures that the agreement achieves its intended purpose. Case law demonstrates that any deviation from established and well-understood terminology can have serious, and sometimes irreversible consequences, particularly if a limitation period is later found to have expired contrary to one party’s expectations.
Given the commercial and legal pressures created by approaching limitation deadlines, parties should begin discussions well in advance. Early engagement reduces the risk of errors and minimises the potential for disputes regarding the scope or effect of the agreement.
4. Key Takeaways
Standstill agreements offer a practical and commercially sensible alternative to issuing proceedings under the pressure of looming limitation periods. When properly structured and carefully drafted, they can benefit both claimants and defendants.
For parties committed to resolving disputes through negotiation or ADR, a standstill agreement may provide the necessary breathing space to reach a constructive and cost-effective outcome.
If you are considering a standstill agreement or are approaching a limitation deadline, our team can talk you through the options available and the practical points to consider. Please get in touch if you would like to discuss your situation in more detail.
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