Eleven Tips to Avoid Litigation

On behalf of Smith Jadin Johnson, PLLC posted on Thursday, June 7, 2018.

If you are a business owner, you need to make sure that all of your customers, employees, and business contacts are happy. For better or worse, more and more people turn to lawyers when things don’t go the way that they expect. Litigation can be quite costly, both in terms of money and time, so you should do everything that you can to avoid it.

Here are some tips to avoid litigation.

Be courteous and respectful. As the saying goes, “an ounce of prevention is worth a pound of cure.” When you find yourself involved in a contentious business interaction, remember to always be polite and hold your tongue no matter what. Take a few moments to breathe and try to keep a level head. Think of ways to deescalate the situation. Acknowledge the other person’s concerns or point of view before expressing your own. Find common ground and narrow the issues in dispute. Speak in a calm and measured voice. By remaining courteous and respectful, you reduce the likelihood of a business disagreement turning into a lawsuit.

Understand the problem. Oftentimes disagreements are caused by a failure to understand the other side’s perspective. Before getting too invested in the dispute, make sure that you understand what the true scope and subject matter of the dispute is about. For instance, while one side may see a dispute as a simple failure to pay, the other side may feel the dispute is about poor customer service or unkept promises. Rather than making the situation worse by talking past the other side, take a moment to consider what the key issues are between the parties. Nothing can start being resolved until the dispute is truly understood.

Be objective. Your business is your livelihood as well as a reflection of your character. It’s easy to understand why business disputes can be emotionally charged. But as all business owners know, the most important thing is the bottom line. It is therefore important to stay as emotionally detached as possible when resolving business disputes. Businesses hire attorneys in part because attorneys can deliver advice free from the emotional attachments their clients might have to a project or issue. When faced with a business dispute and potential litigation, it is important to stay as objective as possible.

Keep communication open between you and the other party. Once you understand the nature of the dispute, it is important to keep the lines of communication with the other party open. Most business disputes are resolved without having to initiate legal action. Lawsuits occur when communication breaks down and one party feels it has been left without any other recourse. If your business is attempting to resolve a dispute without having to pay for attorneys, it is important to keep speaking with the other party.

Keep your records updated. Maintaining good records can save you a lot of time and money in litigation. Good records make your business look organized and credible, while poor records or the absence of records may suggest incompetence or deceit. Maintaining good records will save you the trouble of having to spend time hunting for relevant information during a lawsuit. While every business hopes to avoid litigation, consider what a jury would think of your business’s internal documents if they ever became relevant to a lawsuit. Do the records look professional? Is there adequate documentation of the business’s activities? Do the invoices accurately reflect the work completed? Updated and professional-looking business records go a long way towards establishing the credibility of your business during a lawsuit.

Make sure that you read all documents before signing. Contracts are the cornerstone of all business transactions. Most people do not realize how easy it is to enter a contract with someone else. Especially in the business context, contracts can have enormous consequences, regardless of how “informal” the document might appear or how little time or deliberation was taken before the parties signed the agreement. Except in limited circumstances, courts will enforce the terms of a contract if its meaning is clear. Therefore, before signing any document with a third-party, make sure you’ve read the document and clearly understand its terms. If something doesn’t seem right, you may consider asking an attorney to evaluate the contract’s enforceability and legal effect.

Make sure that you understand the contracts that you have signed. If you are having a dispute with someone that you have a contract with, it is likely that each person’s rights and obligations towards the other person are defined by the contract. You may want to have a lawyer review the contract for you. Are you holding up your end of the bargain? Is the other party? A law firm can analyze the terms of the contract and provide you with an opinion on what the document provides and what your best course of action should be. Is your insurance company not paying you fair value for property damage on a covered piece of your property? Your insurance company’s obligations to you under your policy are controlled by contract. If you are involved in a contractual dispute—never take the other party’s word for it—get the document evaluated by an attorney.

Carry enough (and the right kind of) insurance for your business. Different businesses require different types of insurance, depending upon the industry within which they operate. Beyond a commercial general liability policy and a business owners policy, you may require product and professional liability insurance too. Some businesses require data breach insurance. If you are unsure about the type of insurance that your business needs (or how much), be sure to talk to a licensed insurance agent. An insurance agent can help find you the right coverage for your circumstance and choose the level of coverage that best suits your business’s needs. It is better to have too much than not enough – if you end up having trouble.

Carefully think about the costs, risks, and time involved in litigation. Most business disputes can be resolved without having to resort to hiring a lawyer; however, there are some legal disputes that cannot be ignored or avoided. In order to determine which situation your business finds itself in, you must carefully consider the stakes. Litigation by its nature is expensive, time-consuming, unpredictable, and stressful. Depending on the size of the case, it can become a distraction from the day to day operations of the business. If you think you may need legal representation, you may want to consult with an attorney who can give you a better idea of what it might take to get the dispute resolved.

Unfortunately, disputes are a part of owning a business. There is no way that you can please everybody all the time. In case of a disagreement, stay objective and treat the other side with courtesy and respect. Seek areas of common ground and try to narrow the issues in dispute between the parties. Keep the lines of communication open and look for creative solutions to resolve the disagreement. Maintaining proper business records and the right type of insurance are important factors in determining whether your business has a favorable outcome in legal disputes. Consider the importance of the dispute when deciding whether to consult an attorney. Most disputes should be resolved without attorney involvement; however, some are too important to ignore or go it alone. If your business is involved in the later, consider giving the attorneys at Smith Jadin Johnson a call today.