Litigation (resolving a dispute through court proceedings) can put a huge strain on a business, no matter what size. It isn’t just legal fees that take a toll on businesses. The time and effort spent on litigation is time and effort that business owners are unable to spend on growing and developing the business. Sometimes, litigation may be necessary in order to resolve a dispute. However, it should always be a last resort.
Here are some tips that your business can use to try and avoid litigation:
- PUT AGREEMENTS IN WRITING
Just because agreements can be made verbally it doesn’t mean that they should be. If your business is going to enter into an agreement, it is preferable to have the terms of that agreement in writing. Ambiguity, misunderstandings and poor memory are common problems with verbal agreements and can lead to unnecessary disputes. Invest in having a professionally drafted agreement so as to avoid potential disputes. If you are provided with a written agreement, read on…
- GET ADVICE FIRST
Disputes often arise as a result of one or more parties misunderstanding the terms of an agreement, written or otherwise. Invest in taking advice on important agreements so that you are aware of the potential undesirable outcomes and how your business can avoid them. This will be far cheaper than becoming involved in litigation should things go wrong later.
- FOCUS ON THE BIG PICTURE
It is probable that engaging in litigation will not be consistent with business goals such as profitability and growth. Ask yourself “What does my business have to gain from getting involved in litigation?” If there are no benefits to your business being involved in litigation, then it will probably be commercially preferable to try and find a way to resolve the dispute.
- BE REALISTIC
Be realistic about the industry in which your business operates. Know the issues that usually cause disputes between parties and take steps to minimise the risk of those issues arising in your business’ operations. That may be by obtaining insurance to cover those issues or clearer terms of trade to reduce the likelihood of dispute.
- PICK UP THE PHONE
Parties often find themselves involved in litigation over disputes that could be resolved by good communication. If your business is facing a potential dispute, pick up the phone and try to get an understanding of the other party’s view on the situation. Matters can often be resolved, and lawyers’ fees avoided, by good communication which leads to amicable resolutions.
- BE WILLING TO COMPROMISE
Businesses may receive complaints about their goods or services from time to time. If the complaint is objectively reasonable, be willing to compromise in order to resolve it. This may mean a short-term loss or lower than expected profit in respect of a transaction. However, it can be cost effective in the long run by decreasing the chance of litigation and increasing the chance of repeat business from the party you resolved the dispute with.
- HAVE A MEETING
Even if you commence litigation, each of the courts in Western Australia will require the parties to partake in various forms of meetings to try and resolve the dispute as soon as possible. There is nothing preventing you from having an informal meeting, with or without lawyers, before litigation is commenced to discuss how the matter can be resolved.
- KEEP GOOD RECORDS
Miscommunications can and do occur in business transaction. Keeping good records of communications before, during and after transactions can help clarify any confusion and thus possible dispute caused by miscommunication.
- INVEST IN TRAINING EMPLOYEES
Employers are liable for the actions of employees that occur within the employee’s scope of employment. This means that business owners can become involved in litigation as a result of employee’s actions. Training employees to identify and avoid industry specific risks, and ensuring employees know the limits of their authority is an invaluable tool for minimising the risk of litigation.
About the author:
Stirling Owen who is a Perth lawyer and an Associate at Lynn & Brown Lawyers. Stirling is experienced in commercial law, litigation, probate & Wills and employment law.