EIGHT TIPS FOR BUSINESS OWNERS TO AVOID LITIGATION

TIP NO. 1: PREPARE BUSINESS CONTRACTS, KNOW THEM AND USE THEM.

Business transactions are no longer done on a hand shake.  The business world is complex, and the more complex transactions become, the more potential exists for litigation to ensue.  The cost of litigation is so high that one small lawsuit can virtually bankrupt a business.  While business owners are afraid of litigation, they often know very little about how to prevent it.

Based on our decades of experience, we have developed a list of suggestions for avoiding litigation.  Starting with this month’s tip, proper use of contracts.

There are relationships that are established in every business setting.  Those relationships may be between you and your customer/client or between you and your vendor/supplier.  The basis of that relationship should be documented in writing, namely a contract.

Some transactions do not lend themselves to constant use of contracts.  Probably the most common of these is the supplier that receives purchase orders from customers.  If the supplier needed to send a written contract every time the customer placed an order, the delivery would be delayed, the paperwork overwhelming, and the customer would probably go elsewhere.  However, the supplier can still establish a written contractual relationship by sending a standard contract to every new customer that will apply to all purchase orders sent by the customer.  There will be no need to send another contract unless you want to change the terms of your arrangement.

Some business owners run to the stationary store and pick up something that says “contract” and assume that it will apply to their business.  This is almost never true.  At a minimum, you must read the document you intend to use.  You should also make a list of all problems you have had in your business and determine whether the provisions of the contract cover those situations.  If they do not, you will need to add to the contract.  In many cases, the form needs enough changes that you would be better off having a contract custom drafted for you.

Once you have a written contract you–and everyone else in your company–need to be familiar with the terms.  You must also consistently use your contract.  The contract can be great, but it is useless if it is not signed and followed.

If you need a contract drafted for your business, or an existing contract reviewed, contact our office.  Read our future emails for more tips on avoiding litigation.

Stay tuned for the next tip in a future blog post!

June 8th, 2012 Posted to Litigation | Comments (1)