Canada: Top 7 Tips To Avoid Litigation

Litigation is expensive, time consuming, stressful, and a distraction from your business. It should be avoided, if at all possible. If it is not possible to avoid litigation – you have been sued or absolutely need to sue – you should try to resolve the litigation as quickly as possible. The longer litigation goes on – and it can go on for a very long time – the more frustrating and costly it becomes.

This blog post outlines a few suggestions on how to avoid litigation:

  • Create clear and understandable written agreements
  • Obtain legal advice before you sign an agreement
  • Follow agreements
  • Engage counsel to invoke privilege
  • Negotiate – do not try to bully
  • Consider mediation
  • Compromise to avoid litigation

Create Clear and Understandable Agreements

Creating clear written agreements seems obvious, but it is not uncommon for even very sophisticated parties to enter into confusing, inconsistent or incomprehensible agreements. Senior business people often agree on the contractual basics such as price, product and delivery date, leaving the rest to others to complete. In the process, contractual boiler plate or poor drafting, can make contracts difficult to understand and interpret.

In order for contacts to be effectively interpreted, they need to be clear and understandable. It is worth spending the time to properly prepare agreements to avoid uncertainty and the risk of litigation that comes with that ambiguity.

Obtain Legal Advice

Even what may appear to be a simple or routine agreement should be reviewed by a lawyer. The lawyer may have constructive suggestions that will avoid future potential disputes. It is worth investing a little at the outset to avoid spending a lot later on avoidable litigation.

Follow Agreements

Surprisingly, even very sophisticated parties often fail to follow their own agreements. After spending days or weeks negotiating detailed terms, parties often put the agreement into a cabinet and follow typical or industry practices rather than the terms of the contract. For example, a party may issue purchase orders or change orders because that is their practice, even if the contract calls for other requirements.

It is important to read and follow the terms of contracts you sign. Prepare contract summaries or lists of procedures required by contracts while those contractual procedures are still fresh in your mind.

Engage Counsel to Invoke Privilege

As a general rule, communications between a lawyer and client are subject to privilege, meaning those communications cannot be disclosed. When a serious issue arises, it is important to invest the time and resources to deal with the situation in a way that will reduce the risk of litigation and equip you to succeed, if litigation becomes necessary. You should engage counsel to advise you, not just to provide important advice, but to cloak your investigation with privilege. If witness interviews and internal reports are prepared for counsel in contemplation of potential litigation, they are privileged and only need to be provided to the other side if you choose to do so. Parties often do not realize that internal documentation, including personal notes must be provided to the other side unless they are cloaked with privilege.

Negotiate – Don't Try to Bully

Parties often think they can hire a high power law firm and take an aggressive position, hoping the other side will be intimidated or convinced by their position and capitulate or back off. In my experience, the opposite is almost always the case. When one party comes on strong, the other party usually responds with a hard push back, escalating the dispute. Rather than trying to bully your way into your ideal solution, I suggest you seek a business solution and be prepared to compromise to reach it. If you are unable to reach a solution and need to litigate, then you can turn to aggressive tactics if you wish.

Consider Mediation

If both parties to a dispute are genuinely prepared to compromise, the joint engagement of a mediator is almost always worth it. In order to effectively mediate, it is not necessary for each party to have lawyers or for the litigation to have reached a certain stage. Mediators are trained to assist parties in identifying issues and achieving mutually beneficial solutions. They provide an independent assessment of parties' positions more effectively than the parties' own lawyers. Lawyers often succumb to the strong temptation to tell their clients what they want to hear. Mediators also assist parties identifying creative solutions and provide them with an opportunity to be heard.

Mediation is not necessarily appropriate for every case, but it is always something worth considering.

Be Prepared to Compromise

Finally, you should always be prepared to compromise in order to achieve a settlement and avoid litigation. The courts are an uncertain place; judges are unpredictable. Even what appear to be the strongest of cases fail at least 10 percent of the time.

The cost of litigation is almost always higher than you expect. Not just the legal fees, but the time, stress, lost business productivity, and lost opportunities.

Conclusion

Business disputes are inevitable. Litigation is not. Hopefully, some of the tips in this post will assist you in avoiding litigation and focusing your time, energy and money on productive business endeavours.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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