Disputes can arise easily in any business. Disputes can arise within businesses and between businesses. And the subjects of business disputes can involve any aspect of a business’s complex affairs.
Many businesses employ risk analysts whose job it is to anticipate problems and devise strategies to minimize the identified risks. All businesses should probably take the time to review the range of their activities, identify areas in which there could be a risk of conflict and develop strategies to minimize the risk.
What are Some Common Types of Business Disputes?
Company disputes are likely to involve breaches of contracts. This is because so much business is done through contracts, contracts among co-founders or partners, with employees, with suppliers, contractors and service providers and, of course, with clients and customers. So, claims of breach of contract may very well be involved in some, if not all, of these business relationships.
People go into business with one another in order to use their expertise and resources for the profit of each of them. Sometimes, however, situations come up that lead to a conflict among the partners. Some of the most common conflicts might include the following:
- One partner is not performing to expectations or has stopped contributing to the partnership altogether;
- Partners may disagree about what is a fair division of the assets when one choose to leave;
- Partners can disagree over division of the profits;
- One partner may even defraud the other partner(s), or misappropriate funds or assets.
If a business is involved in buying or selling products, warranties, express or implied and claims of breach of warranties might give rise to business disputes also.
Some businesses deal in conflict. So, for example, collection agencies pursue debtors and try to collect the money they owe. They must be well informed about government regulations regarding debt collection and obey the rules or risk penalties for not conforming to regulations. They will often file lawsuits and go to court to collect on judgments.
How Can I Prevent a Business Dispute from Occurring?
As noted above, one way to avoid disputes is to anticipate them before they arise. So, for example, what partners or limited liability shareholders start a business, they would be well advised to consult an experienced business lawyer at the beginning. An experienced business lawyer can inform the partners or shareholders of the kind of problems that often come up and how a well-thought-out partnership agreement or agreement for formation of an LLC can be drafted to provide for all eventualities.
For example, agreeing at the beginning on best accounting procedures would probably be one way to ensure that a company cannot be defrauded. The Internal Revenue Service can question tax returns and subject a company to a different type of audit.
Looking at the job description of a risk analyst can give business people some insight into where in their business they should look for potential disputes and problems. A professional risk analyst might do the following for a business:
- Review financial and accounting documents and practices;
- Stay abreast of industry developments;
- Keep up with current events and think through their possible effect on the economy and the industry;
- Stay informed about applicable government regulations and work to comply as required;
- Devise contingency plans for emergency situations;
- Monitor and forecast market trends for the business’s industry;
- Deploy practices for reducing or controlling risk.
- Cover risks with insurance policies if possible.
Of course, the best laid plans of mice and men often go awry, so even after careful planning, problems and disputes can arise.
How Can I Resolve Business Disputes?
While a company may not want to file a lawsuit as a first step after a dispute develops, it may want to consult an experienced business attorney in the early stages. The goal would be to have a clear understanding of where the company stands legally in the dispute and what its options might be. Also, a company wants to identify the outcome it wants from resolution of the dispute.
A first approach would be to work to resolve the dispute through dispute resolution procedures. Of course, negotiation among the parties to a dispute is a tried and true method of approaching it in the beginning. Negotiation leading to resolution is probably going to be the quickest and least expensive way to resolve a problem. As with conflict in any situation, a business should choose a person to represent it in a negotiation who can remain calm and not make the situation personal or inflame it rather than keep it on a professional level.
If negotiation is unsuccessful, another approach that is only slightly more formal, mediation, might produce results. In mediation a neutral third party works with the parties to a conflict to help them reach a consensus resolution. Any resolution must be mutually satisfactory to all parties. When they have reached an agreement on which all parties concur, then the agreement is formalized in written form and signed by all parties. When the agreement is put in writing and signed by all parties, it becomes binding on them. Mediation is a useful process for parties who want to maintain their control when resolving conflicts. It is also less expensive and likely to reach a conclusion more quickly than litigation.
If negotiations and mediation have not produced a mutually satisfactory result, arbitration is another option. In an arbitration, a neutral arbitrator is selected, usually by the parties. Sometimes a panel of arbitrators can be used instead of one person. This arbitrator is something like a private judge, or if there is more than one, like a panel of judges. The arbitrator or panel of arbitrators makes a decision. Usually, before the arbitration begins, the parties have agreed that the decision of the arbitrator is final. So, arbitration should bring the dispute to a close.
It is best to seek the advice of an experienced business lawyer who knows about arbitration for advice regarding the choice of arbitrators. A business might also want a lawyer, to present the business’s case and to supervise drafting of the final arbitration decision, if possible. Remember that an arbitration decision is usually final and binding on the parties. Again some people see arbitration as preferable to litigation because it can be done more quickly and less expensively.
Business disputes and litigation are sometimes a matter of course in certain industries. For example, landlords may often resort to eviction proceedings to solve a dispute with a tenant who is in arrears on their rent. Or debt collectors may often engage in collection actions. Of course litigation is always an option if a business dispute cannot be resolved through an alternative process.
A party would choose litigation if informal processes have failed and the parties are not interested in arbitration for whatever reason. This involves one party filing a complaint in a civil court to pursue a legal remedy. Litigation is a structured process that is controlled by the court in which one of the parties files a lawsuit. The process will be finalized when the parties settle or a judge or jury, if there is a trial, gives their verdict. Before launching a lawsuit, keep in mind that litigation can be time-consuming and expensive. And a particular result can never be guaranteed.
What are Common Remedies in a Business Lawsuit?
If a business dispute results in a lawsuit, two kinds of remedies would probably be the most common. One is the payment of money damages. This is probably the most common relief offered by success in a civil lawsuit based on breach of contract.
Another class of remedies is occasionally possible in a breach of contract case. These are called “equitable remedies,” and sometimes the facts of a particular case might justify the award of an equitable remedy.
The equitable remedies for breach of contract are as follows:
- Contract Reformation: If a court awards a party contract reformation, it means that the court will instruct the parties to rewrite their original contract so that it reflects the true intentions of the parties more accurately than did the original. It is awarded in cases where there was either a mistake or misrepresentation in a portion of the contract terms.
- Specific Performance: Specific performance is a court order that requires the party in breach to provide the performance that they promised in the contract.
- Contract Rescission: Contract rescission is when the court orders the parties to cancel their entire contract. The main goal of contract rescission is to put the parties in the same position that they were in before they entered the contract. Both parties are relieved of their obligation to perform the contract.
Should I Hire an Attorney for Help with My Business Dispute?
An experienced business attorney can help with a business dispute in a number of ways. They can advise you where you stand legally. They can represent you in negotiations with the other party to the dispute. They can advise you of your options and help you figure out which one is likely to lead to the most favorable resolution.
If the dispute cannot be resolved in any other way, of course an experienced business lawyer can represent you in a lawsuit. In any event, you are most likely to get the best possible result in your business dispute if you have an experienced business lawyer representing your interests.