In brief - Simple, practical steps can help you safeguard your
By implementing a few common sense tips, not only can you lessen
the risk of your business being sued or having to sue, but in the
event litigation is unavoidable, you will be in a stronger position
if the matter does go to court.
Why avoid litigation?
There are many compelling reasons why you would want to avoid
litigation. It can be time consuming, distracting and expensive,
sometimes costing more than the amount in dispute. Time spent
preparing a matter for trial takes away time and money from your
business. Disputes can also affect employee morale and damage your
business reputation. It's stressful stuff.
Top six common sense tips to avoid litigation
1. Put it in writing
It's very easy for things to go awry when there is nothing
documenting the agreement between the parties or variations to that
agreement. That's why it's important to ensure that any
agreement you have, whether with an employee, supplier, customer or
business partner, is captured in writing and any variations to the
original agreement are also documented, approved and signed
Having an agreement which clearly sets out what happens when a
partnership or business relationship breaks down can minimise the
cost of resolving a dispute. It can sometimes be too late to
salvage a relationship and reach an amicable resolution once things
have started to deteriorate. And clearly, it's no use having an
agreement if it's poorly drafted or doesn't accurately
reflect the terms agreed.
If the shoe's on the other foot and you are the customer,
making a contemporaneous file note or documenting the agreement is
still important. If they say to you over the phone: "I can
provide it to you by X", confirm the arrangement by sending
them a note or email.
Further, as a business you are in the best position to ensure
that the agreement not only documents the arrangement reached, but
it reflects the terms on which you want to do business. For
example, you can choose specifically to include provisions which
make mediation mandatory if there is a dispute.
2. Read the agreement
It sounds trite, but once you have an agreement, read it
carefully and understand its day-to-day operation. Time and time
again, we see examples where an accepted regime falls short of the
provisions specified in the contract. Everything goes swimmingly
until the parties fall into dispute.
3. Keep them in the loop
One of the best ways to avoid conflict and misunderstanding is
to ensure your clients or customers know what's going on. This
may include informing them about increases in costs, budgets and
scheduling. Discontent can often arise when you fail to meet a
cut-off date or attend to seemingly minor things like returning
emails and calls promptly. Respecting your client or customer and
keeping them well informed can go a long way towards avoiding
4. Act before it escalates
If you take steps to deal with a hiccup when it arises, you can
often prevent it developing into a major problem and positions
becoming entrenched. It's no use ignoring a glitch or complaint
and hoping it will go away. It's best either to bring the
matter to a head or to seek advice from a professional before you
You should also ensure that your management team is effectively
trained to identify and resolve disputes and is comfortable enough
to raise them with you. Do you have systems which encourage
employees to report potential risks?
5. Think about who you want to do business with
Ask your referral source or do an internet search and check out
your potential clients or customers, employees and suppliers. Ask
yourself whether they appear to be an individual or company you
want to do business with. Are they the type of client you would
want to work with, or the kind of person you would want to
If they appear to be embroiled in disputes, it's 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
6. Put yourself in their shoes
Try to think objectively, put yourself into the other side's
position and work out what is motivating the decision to litigate
or refusal to negotiate. Is it simply personal animosity, or does
the other party have a genuine reason for commencing
There may of course be instances where litigation is advisable
or unavoidable, but if you follow these basic tips, you have a much
better chance of resolving your dispute amicably or avoiding
Peter Sise explores how your contractual clause for recovery of legal costs might not do what you think it does.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).