Contrary to some public perception, good law firms do not want to see their clients faced with costly litigation! Litigation should be a last resort in a business dispute and businesses should do all they can to minimise the risk of matters escalating to the extent that Court intervention is necessary.
Following the basic steps below should help to minimise the risk of litigation.
Put it in writing
If there was a secret lawyers rulebook (honestly there isn’t) this would be the first rule. If something is in writing, there it is so much easier to identify what it is.
All commercial arrangements and relationships that your business has with customers, employees and suppliers should be recorded in writing. Evidence is always crucial in the event of a dispute and clearly drafted agreements signed by the parties are invaluable.
Commercial agreements should reflect in plain English what the parties have agreed. If it sets out what the parties intended and were required to do then it is easy to identify when someone is in breach.
Employment contracts and policies should leave no uncertainty as what is expected of the employee.
Commercial terms should be carefully drafted to ensure business trading with you understand the terms upon which you trade.
Read all agreements carefully before entering into them.
Although this may sound fundamental, it is essential that you read and understand a business agreement before entered into it. If you are committing your business to doing something, you must be clear what your are committing to.
You would be surprised at how many times people still don’t read what they are signing. By way of example, how often do standard terms for licensing agreements that appear on your computer devices requiring you to accept their terms? How often do you tick ‘yes’ to confirm your agreement without reading them?
By reading through and understanding commercial agreements, you will understand what you can accept and what you are agreeing to. You will also spot any ‘nasties’ that may require further discussion.
Prevention is better than the cure. Once you have committed to do something, you will be bound by contract to do it.
Maintain good relations
Where there are problems with business contact, trying to resolve any issues through discussion and open dialogue. Avoid early declarations of war. Attempt to diffuse any dispute by keeping relations cordial.
Contact them and explain what the issues are. Invite the other party to assist with possible solutions. It is often in the interests of the other party to work with you to overcome the issue.
Arrange to meet or discuss matters by telephone. As useful as emails are, they are open to misinterpretation and can aggravate the position if their content is misunderstood. Disputes can often arise from simple misunderstandings between the parties. Minimise the possibility of this occurring.
Recognise that businesses often succeed on the strength of their existing business relationships. Remain professional and consider the bigger picture. On occasions, it may be beneficial to compromise on an issue so as to strengthen a commercial relationship and to secure future business. Be strategic in your approach.
Learn to recognise trouble
If you operate a business, you will soon develop a sixth sense enabling you to recognise the contracts and transactions that are inevitably going to end in dispute. Very rarely will an opportunity arise that offers significant rewards without either considerable risk or investment. As the expression goes “something is too good to be true, it usually is.”
Be brave enough to decline the type of work that is inevitably going to result in a dispute. Take the time to familiarise yourself the companies in your industry that are frequently involved in litigation. Consider carefully whether you wish to trade with them. If the answer is yes, then consider what specific provisions you can incorporate into your agreements with them, to minimise the risk of litigation or to provide a mechanism by which to resolve disputes.
Avoid past mistakes
Very few businesses or individuals will get through life without making mistakes. Sometimes mistakes just cannot be avoided. The secret is to learn from them.
Treat each issue as a learning point and ensure that the necessary steps are taken to avoid a repeat.
This may entail revising standard business agreements or the terms and conditions on which you trade. It may involve running training courses within the business to teach staff members how to avoid pitfalls. Alternatively, it may require the directors to engage in an exercise self-reflection, to consider how they would approach the situation differently if it happened again.
Resolve issues early
In many instances, disputes are resolved more easily before the parties have become entrenched in their positions. Problems are often more capable of being overcome if they are tackled early before the consequences have become further reaching. Ignoring issues rarely makes them go away.
Business contacts and clients will respect you for attempting to resolve problems at an early stage rather than dragging an issue out. Refusing to remedy an obvious failing or contractual breach can give rise to additional cost consequences (often additional legal costs) if the matter escalates to litigation. It also makes the business look foolish which can affect future business dealings.
Prepare for the worst
Litigation is not as much about justice as it is about evidence. Cases are won and lost on the evidence that is available to the court. Although the goal should be to avoid the matter ended up in court, you should always be alert to the fact that this is where the dispute may be resolved. Accordingly, early preparation for this will assist your prospects.
Contact your legal team early into the dispute and take their advice. Keep all of the documents and correspondence that relates to the issue. Ensure file notes kept of relevant meetings and discussions. Organise this evidence so that if required, you can provide to the court and your legal team in an easily understood fashion, the information that confirms your position in the dispute.
Remain objective with your position. A business that can present its position professionally and objectively to the court, will be more likely to be perceived as credible than one that is not.
Alternative dispute resolution options
Litigation is expensive and costs can easily exceed the value of the dispute. There are various alternatives available that can result in an early resolution and can contain settlements options that cannot be awarded by a court. ADR should not be considered as a sign of weakness.
ADR can take a number of forms. The use of mediators and conciliators built into the procedures within the court system. Third parties can be appointed to act as arbitrators in dispute, considering at an early stage the position of the parties and adjudicating what the outcome should be.
A good legal team will advise you as to the ADR options and recommend the merits of each respective your dispute. A successful business will recognise the value of avoiding litigation.
Ashbrooke Law. Innovative. Commercial. Responsive.
Disclaimer
Ashbrooke Law publications are intended to provide guidance and general information. They should not be relied upon as legal advice. Formal legal advice should be sought on matters of interest arising from this article.