When entering into a contract nobody wants a dispute and even more, wants to avoid it escalating into litigation. Litigation is time-consuming, expensive, risky and stressful; it diverts precious resources and is a distraction to the normal business activity. Due to the unpredictability of events and the inability to control other parties, disputes are sometimes unavoidable. However, most of the litigation is avoidable and by applying a few prudent tips, not only one can lessen the risk of being sued or having to sue, but in the event litigation becomes inevitable, one will be in a stronger position to defend the matter in court.
Tips to avoid dispute and litigation
Put every agreement in writing. Many disputes arise due to misunderstandings and ambiguities that could have been avoided if the parties initially set forth their agreement in writing. It is very easy for things to go wrong when there is no written agreement between the parties or amendments to such agreement.
Maintain complete files and documentation of the understanding reached relating to a contract. Relying on oral testimony, memories and interpretations are less than ideal and certain to complicate resolution. It is important to ensure that the agreement not only documents the arrangement reached, but it reflects the terms and conditions agreed between parties.
- Read and review the agreement
Once you have got the agreement drafted, there is nothing more important than reading and understanding the agreement before signing it, to confirm that they reflect your intentions. Ensure that all offers and promises are accurate and the terms and conditions are not deceptive. It is vital to ensure that the timelines mentioned are realistic and that there are no chances of delay or cost overrun.
Review the terms of the agreement, surrounding facts and all related written communications, including emails, letters and messages to ensure you truly understand all relevant facts. It is also important to regularly review the terms and conditions of standard agreements, to ensure that they reflect the changes in governing laws and current business practices.
- Communicate and maintain relationships
Establish and maintain good relationships with clients and business partners and treat them fairly, because people are less willing to ruin an existing good relationship by litigating.
One of the best ways to avoid conflict and misunderstanding is to ensure your clients know what is going on. This may include informing them about increases in costs, budgets and scheduling. Discontent can often arise when you fail to communicate or attend to seemingly minor things like returning emails and notices promptly. Respecting your client and keeping them well informed can go a long way towards avoiding litigation. Even when a dispute arises, gather all information related to the dispute and speak with all involved participants in order to adequately evaluate it.
- Act before a dispute escalates
A stitch in time saves nine. A prompt step to address a hindrance when it arises can go a long way to prevent it from developing into a major problem and positions becoming entrenched. It is no use ignoring a glitch or complaint and hoping it will go away. Respond promptly to potential problems before they escalate, because litigation often arises simply because problems were not addressed in a timely manner.
It is best either to take up the issue immediately or to seek professional advice to resolve it. Obtain feedback from trusted and impartial individuals on your position and the dispute itself so that you may evaluate the situation objectively and unemotionally.
You should also ensure that your management team is effectively trained to identify and resolve disputes and is comfortable enough to raise them at appropriate levels. Implement procedures that ensure a potential dispute is communicated up the chain of command so suitable resources and attention may be dedicated to resolving it before it is too late.
- Identify other party’s strengths and weaknesses
Often the easiest way to avoid litigation is to avoid doing business with individuals and companies with bad reputations, a history of litigation, and other red flags. It is also important to fully understand the opposite party’s point of view and evaluate the strengths and weaknesses of their position.
A search on the internet can help in checking out potential client’s strengths and weaknesses. Similarly, a check of court websites where the party has its principal office can throw up the cases pending in its name. Check whether they appear to be an individual or company with which you can do business. Are they frequently involved in disputes and litigations?
If they appear to be embroiled in disputes, it is best to steer clear. Some organisations and individuals have a tendency to attract trouble. You likewise need to think about whether your own company fits the profile of the one that is always involved in disputes.
- Stand in the shoes of the opposite party
Putting yourself into the other party’s position and understand what is motivating the decision to raise the dispute or refuse to negotiate. Is it simply personal animosity, or does the other party have a genuine reason for commencing litigation? Try to look at things from the opposite party’s viewpoint and it may show the dispute in an entirely new angle and chances are that you may find merit in their argument and ultimately agree to a settlement.
Open a dialogue regarding a settlement and use your best efforts to maintain professional and cordial communications throughout the dispute. Disputes that are not resolved immediately can often still be resolved prior to litigation if the channels of communication remain open and productive.
- Dispute resolution clause
Though, when you enter into a contract, you don’t want to think about a dispute arising, it is important that the parties should focus on any unforeseeable events, which may put the contract into trouble. It is advisable to have properly drafted dispute resolution clause incorporated in the agreement. A clearly drafted dispute resolution clause can minimise the cost of resolving a dispute which may arise.
This clause should preferably provide for mediation and conciliation before escalating the dispute for arbitration or litigation.
Mediation differs greatly from arbitration in that the mediator, who is a neutral third party, does not impose a solution. The object of mediation is to help the parties resolve their own dispute, so a mediator’s functions can vary depending on the personalities and wishes of the parties and their attorneys, the nature and history of the dispute, and the personality and skills of the mediator. Mediation has been used to settle conflicts of every kind, from international political disagreements and labour disputes to landlord-tenant, consumer, and medical malpractice contests. There has been a rapid increase in business use of mediation over the past few years.
- Get proper advice and evaluate the chances of success
Engage a legally qualified person to understand your legal rights, potential liabilities and the strengths and weaknesses of your arguments before you sue or are sued. Evaluate the likelihood of actually recovering damages from the other side and obtaining a satisfactory resolution. Determine alternative solutions for a satisfactory resolution without resorting to litigation. Frequently a win-win resolution is possible.
If you are wrong, take responsibility promptly and work diligently to correct the problem and mitigate damages of all parties. If you are right, even 100% right, think long and hard before instituting litigation, because litigation should be the final choice.
There may, of course, be instances where litigation is advisable or unavoidable, but if you follow these 10 basic tips, you have a much better chance of resolving your dispute amicably or avoiding litigation altogether. It is always better to remember that even if you win in the court, ultimately, you may still feel like you lost.