DTM Legal’s Rachel Logan offers her top five tips for avoiding litigation.
At first sight it may seem contradictory for a litigation lawyer to advise on how best to avoid litigation. However, at DTM Legal we aim to secure the best possible outcome for our clients, and this can often only be achieved at the early stage of a disagreement, before positions become entrenched.
Of course some disputes are unavoidable, and this article aims to provide you with some simple tips on how to avoid litigation, or at best, be in a strong position if matters do go to court.
There are endless reasons why a business or individual should avoid litigation. Court proceedings are costly, and in some instances, the cost of litigation can exceed the value of the claim, with no guarantee that you will see the return of your legal fees. Preparing cases for court can consume management time, drain resources and may impact on staff morale.
Ultimately, it will take you away from what you do best, namely progressing your business and generating profits. Worse still, litigation can generate strong animosities which can be damaging to your reputation impacting on existing and future business relations. There are a number of ways you can reduce the need for litigation:
1. “A verbal contract isn’t worth the paper it’s written on” – Always Put it In Writing!
Disagreements often boil down to what was, or more importantly what was not, agreed between the parties. As Samuel Goldwyn once famously said, “a verbal contract isn’t worth the paper it’s written on”. It is difficult to establish who said what if the agreement is not properly documented. Whether it is an agreement with an employee, customer, contractor or supplier, it is vital that it is recorded and preferably signed in writing.
Bad habits are easy to fall into, especially when dealing with a long standing and a seemingly trusted client. If communication is made verbally, then it is advisable to follow it up with an email or standard letter. This will ensure that the agreement reflects the terms on which you want to do business.
2. Beware of Online Documents!
At the click of a button you can access various online resources including example tenancy agreements and standard contracts. While they may look professional and sound good, a lack of tailoring will result in the contract being inadequate to protect your business needs.
It is really important to invest time at the outset and have your contracts properly drafted.
This will help to ensure that all eventualities are considered before the dispute crops up. If a contract is silent on a specific point and a dispute does occur, litigation may be your only option for the court to decide what terms were incorporated into the contract. An unenforceable contract due to cutting corners will far exceed the cost of having a contract properly drafted and tailored to your needs.
3. Act, now!
If a problem is identified at an early stage and acted upon, positions are less likely to be become entrenched. This makes negotiations easier and offers for settlement more palatable. If a dispute is allowed to fester, your emotions are likely to become involved which will no doubt cloud your objectivity.
Procedures should be in place to ensure the proper identification of existing or potential risks. It is important to have a reporting procedure which will allow your employees to notify management of any potential risks. Once a problem is identified it can be investigated fully and if necessary, legal advice obtained.
4. Make an offer to mediate
If a problem cannot be resolved through written communication, consideration should be given to mediation. This is a process whereby a neutral third party will facilitate negotiations with the aim to achieve a consensual outcome. Although not always easy, you must enter mediation with an open mind and both parties must be willing to compromise. Mediation is confidential and will be “without prejudice”.
This prevents either party using the discussions as evidence of liability at a later stage, which in turn encourages openness and transparency. Even if the dispute is not resolved, you should be left with a better understanding of the issues and settlement is often reached during the days which follow the mediation meeting.
5. Know who you are doing business with
It goes without saying that attracting new clients is a primary objective for most businesses. Before entering into a contractual agreement with a new contact it is important to conduct thorough research to gauge their ability to perform the contract.
Online resources are available to check the solvency of a company or individual, and will help to flag any concerns. It may also be worthwhile to subscribe to a credit reference agency who can conduct a more thorough background search on your behalf.
The ability to resolve a dispute out of court is the preferred option for most businesses, and will save time and expense. While resolution is not always possible, taking the proactive steps outlined in this article will limit the risk, and lessen the likelihood of litigation.