A highly successful business will attract potential lawsuits; it's almost guaranteed. However, most of these business disputes do not have to end up in court. In most cases, business owners and managers can navigate a dispute without the need for litigation.
Successfully negotiating and resolving a dispute to avoid a legal altercation, however, requires an understanding of the law, an understanding of the other party's needs and motivations, tact and diplomacy.
Tips for preventing business litigation
Here are five things that every business owner can do to avoid a lawsuit:
Follow the golden rule: It sounds too simple to be true, but if you follow the golden rule and treat others as you would wish to be treated, you can avoid a lot of arguments and difficulties. Always remember to step into the other party's shoes and you will be able to prevent numerous lawsuits.
Get better at communicating: Communicate your expectations, needs and the agreement as concisely and clearly as possible. Put it in writing and ask for signatures, but take great pains to explain the agreement so that there's no chance of misunderstanding. When people know exactly what they're getting into, they'll be less likely to fall into a dispute.
Study your corporate history: Look back at past lawsuits and learn from them. What went wrong and how can you do it better next time to prevent a similar disagreement from happening in the future?
Act fast: If another party has a problem with your organization, don't delay in responding as that will only inflame the dispute. Address the situation directly, quickly and diplomatically to find a resolution before things get out of hand.
Use litigation avoidance provisions in your contracts: There are numerous strategies and types of language that you can employ in your legal contracts to provide contingencies that will go into effect to avoid litigation in the event of a disagreement. These include: mandatory mediation provisions, cure provisions, arbitration provisions, agree to follow expert opinions in the event of a dispute and other strategies.
Most disputes can be resolved out of court
If, in spite of your best efforts, a serious business dispute develops between your business and another party, it will probably be in your interest and the other party's interest to find an out-of-court solution. The more you know about the law that applies to your situation and your legal rights and options the better chances you'll have of staying away from the courthouse.