Avoiding Lawsuits - Commonsense Tips for Business Owners

by : Michael Abney

Despite headline-grabbing jury verdicts awarding millions of dollars to grievously injured victims, the vast majority of lawsuits never go to trial. The typical lawsuit settles, but only after the lawyers have been paid their fees. For most businesses, litigation is a necessary headache that rarely adds to the bottom line. It is something to be avoided. Discussed below are three common but easily avoidable mistakes that lead to unnecessary litigation.

Get It in Writing!

The most common mistake we have seen through the years is business people who did not put their agreements in writing. Many disputes would never happen - and many others would settle much more quickly - if the parties had put their agreement in writing.

Putting your agreement in writing serves several purposes:

* Avoiding miscommunication. Even honest business people acting in complete good faith can disagree over the terms of an oral agreement. Putting your agreement in writing helps ensure that both sides understand what they are agreeing to do - so there are no surprises down the road caused by honest, but costly, misunderstandings.

* Protecting against selective memories. Again, even honest business people can have one-sided memories of what the terms of an agreement were; especially when they are not happy with how the agreement turned out when put into practice. Putting the agreement in writing reduces the possibility that failed memories will lead to a dispute.

* Avoiding fraud. If the other party to a business agreement refuses to put its promise in writing, that promise is probably not worth the paper it is (not) written on. Beware of doing business with someone who is not willing to put his or her promises in writing.

Get It in Writing - Again!

After you have entered an agreement and the parties are carrying out their obligations, sometimes the deal changes. Your written agreements should reflect the changes. If the parties to an agreement agree to change the terms, confirm the changed terms in writing. Many contracts specifically state they cannot be amended unless the change is in writing and signed by both parties.

Follow Your Agreement.

Once your agreement is in writing, make sure you follow it! Many contracts are broken because a party cannot perform in a way that makes economic sense. But occasionally disputes will arise because a party who could have properly performed its obligations failed to do so simply because an employee "dropped the ball." If your employees are responsible for carrying out the agreement, make sure they are aware of their obligations, such as performance deadlines. A thoughtful and well-written agreement can help you avoid disputes only if you and your employees understand and remember to follow its terms.

This article constitutes general information only and should not be relied upon as legal advice.