By: Michael Safren
While there is no way to completely insulate your business from litigation, there are certain steps that every business owner should take to avoid litigation where possible. Below are five easy steps that every business owner can take immediately to help avoid litigation:
Reduce all agreements to writing and have all parties sign the agreement. Nothing fuels business litigation more than disputes that arise from differing recollections over the terms of an agreement, let alone disagreement on whether there is an actual agreement in place. Having a written agreement can avoid these types of disputes and bring some element of certainty to the parties. In some cases, the absence of a written agreement or contract signed by the parties may preclude your ability to legally enforce the agreement.
Many contracts will have terms and provisions which limit your rights or place you in a disadvantageous position. Some of these unfavorable provisions range from mandating arbitration, limiting consequential damages, pre-selecting a distant venue for dispute resolution, pre-selecting unfavorable applicable law, disclaiming warranties, requiring indemnification, and apportioning the prevailing party’s attorney fees to the non-prevailing party. Read and carefully consider the terms before signing the agreement to ensure that you understand the effect and consequences that these provisions will have upon the agreement and your business. This will help avoid the need for litigation to try to extricate your business from an agreement with unfavorable terms.
Generate, keep, and retain documentation for all business activities. Develop a documentation retention policy to keep and maintain copies of written communication, business records, and any contemporaneous notes that you or your employees make take during encounters with clients, suppliers, vendors. Generating and retaining good records provides your business with the ability to objectively demonstrate, establish, and/or verify the facts. Good documentation will discourage unwarranted and unjustified claims against your business.
At the first sign of trouble, address the problem directly. Ignoring problems will not make them go away, instead the problems will likely escalate into larger disputes that will more likely turn into litigation. Whether the problem lies with a vendor, supplier, employee, or customer, attempt to address the concerns with the person or entity directly through clear communication and attempt to resolve the matter before it develops litigation.
Attorneys can draft and review contracts, advise on regulatory and statutory requirements, and identify legal issues before they become a problem. An ounce of prevention is worth a pound of cure and regular consultation with an attorney who is familiar with your business and industry can you help navigate the complex, and ever-changing waters of business today.
Michael Safren is a Partner at The Law Offices of Jenny Ling, PLLC. His practice focuses on business, real estate, and civil litigation.