HOW TO REDUCE THE LIKELIHOOD OF COMMERCIAL LITIGATION Your Rights and Responsibilities Presented By Owen Hodge Lawyers
OVERVIEW •
Introduction
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Five tips to reduce the likelihood of commercial litigation ! Draft detailed agreements outlining important relationships ! Put business deals in writing ! Keep careful records ! Provide full disclosure
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! Anticipate possible future contingenties
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What’s next
INTRODUCTION Litigation can damage your company’s brand and good will as disputes become public.
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! Whether litigation arises due to a problem with an employee, supplier, distributor, competitor, customer, or any other individual or organisation, litigation is an expensive distraction from normal company operations.
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Litigation can be time consuming and costly as you pay for lawyers, court costs, and expert witnesses. Because the outcome of any litigated case is uncertain, there is also a significant risk that your organisation will lose the case whenever you sue or are sued by another.
INTRODUCTION •
With so many downsides to litigation, companies need to do everything they can to try to avoid it.
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While there is no way to guarantee you’ll never find yourself in the court system, there are steps you can take to try to avoid becoming embroiled in a legal dispute.
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Owen Hodge Lawyers can explain options for avoiding commercial litigation so your organisation does not have to deal with the financial stress and time-consuming ordeal of going to court.
DRAFT DETAILED AGREEMENTS OUTLINING IMPORTANT RELATIONSHIPS Reducing the Likelihood of Commercial Litigation •
You should have a written buy/sell agreement among company owners. You should have written agreements with suppliers. You should have written agreements outlining employee rights and responsibilities.
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An oral contact leaves room for a he-said/she-said situation that not only gives rise to more disagreements but that also makes disputes harder to settle.
DRAFT DETAILED AGREEMENTS OUTLINING IMPORTANT RELATIONSHIPS Reducing the Likelihood of Commercial Litigation •
When you have a contract in place, everyone will know their rights and obligations, leaving less room for problems that lead to litigation.
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If a lawsuit does arise out of a disagreement, the court can turn to the written contracts to assess who is in the wrong and what the correct resolution is.
PUT BUSINESS DEALS IN WRITING Reducing the Likelihood of Commercial Litigation •
When a new deal is made, ensure that everyone is on the same page by sending a written letter spelling out the terms of the agreement. If the other parties to the deal had a differing interpretation of the consensus, the problems will become apparent right away and can be addressed before you get too far into the business relationship
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The written details about the business deal also ensure all parties to the agreement know what they must do to complete the transaction successfully, thus reducing the chances of a conflict as the deal goes forward. Again, having the details in writing also means if the deal falls apart or goes wrong, the court has a way to unravel what should have happened. This allows the court to more easily rule on who was in the wrong.
KEEP CAREFUL RECORDS Reducing the Likelihood of Commercial Litigation •
You should keep records of communications you send or receive, including electronic communications. The records should be searchable and accessible so you can find all communications in connection with a specific issue.
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You can also keep notes during negotiations in case questions arise later about what a specific contract term means or what the parameters of your contract involved. When you have detailed records, you can refer to the written documentation and understand what your rights and responsibilities are.
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You can also use the records to refresh the memory of others you are doing business with if you think they’re getting off track. As a last resort when litigation arises, you can use your detailed records to convince a court to view things your way.
PROVIDE FULL DISCLOSURE Reducing the Likelihood of Commercial Litigation •
Customers, suppliers and employees should have a full understanding of what you are offering to them. Whether you are giving a worker a specific position in the company or a customer a specific product and warranty, you don’t want any unexpected surprises that could cause anger and upset.
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Disclosure statements should be accessible and understandable so everyone you do business with is clear on company policies and transaction terms. When customers, suppliers, and employees know exactly what to expect, they can make an informed choice about whether to take or leave the deal you’re offering.
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On the other hand, if you make promises you can’t keep, you could find yourself being faced with a lawsuit by an angry individual or company that feels misled.
ANTICIPATE POSSIBLE FUTURE CONTINGENCIES •
Your company may grow or expand in the future, or business partners may decide to leave.
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You may need to hire more employees or secure financing in order to grow. Whenever you make any big decisions, consider how the steps you are taking can affect the long-term goals of your organisation and about how problems could arise that affect that future.
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You can then plan ahead for these potential problems by creating contractual agreements that address contingencies and by establishing a written company policy that limits your liability.
If the worst does happen and a disagreement arises, you need to be represented by a qualified and experienced legal professional who can argue for your interests and advocate on your behalf.
! Call us today on 1800 770 780 or contact us via ohl@owenhodge.com.au to schedule an appointment with our experienced commercial lawyers.
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1800 770 780 ! www.owenhodge.com.au ! ohl@owenhodge.com.au