5 Ways To Avoid The Expense And Reputation Damage Of Litigation

Written by: Fargo Inc

As litigators, we represent clients in a wide range of complex business matters, ranging from contract and employment disputes to real estate and securities litigation. Since being involved in a lawsuit is time-consuming and expensive – not to mention bad for your reputation – we also counsel our clients on ways to avoid litigation.

Here are five tips that can help your business avoid litigation:

1. Have a Written Agreement in Place and Be Clear About Your Expectations

Having a written agreement in place is a great way to protect your business from becoming involved in a legal proceeding. While oral agreements may be legally enforceable, they frequently prove to be problematic. The terms of an oral agreement are often ambiguous. As a result, oral agreements may lead to disputes between the parties because the responsibilities of each are unclear. The best way to make sure the expectations of each party are certain is by reducing your agreement to writing.

2. Include Litigation Avoidance Provisions Within Your Written Agreement

Along with having a written agreement, it is a good practice to consider including certain litigation avoidance provisions within your agreement. Depending on your business, it may make sense to include a mediation or arbitration clause in your agreement. A mandatory mediation or arbitration clause may save your business time and money and, more importantly, may help your company resolve disputes privately and keep the conflict out of a public proceeding.

Another provision you should consider including in your written agreement is a choice of forum clause. If a dispute does arise, a choice of forum clause allows you to choose where the legal proceeding will be held. At the very least, being able to control where your business will be litigating its conflicts will help save the company time and money.

3. Spot and Solve Problems Quickly

An additional step you can take to help protect your business from becoming involved in a lawsuit is to respond quickly to problems when they do arise. Even the smallest of complaints can turn into a major issue if not dealt with properly. For a business, it is crucial that employees know how to identify issues that could potentially expose the company to liability and to make sure they report those problems to management. When management is notified of an issue, it should act quickly to address the problem. Complaints are certainly unpleasant, but avoiding an unhappy customer will only make the problems worse. Businesses that provide quality customer service are far less likely to find themselves involved in litigation.

4. Insure Your Business and Contractually Limit your Liability

Your business can also avoid expensive legal proceedings by making sure it is adequately protected. This can be done through purchasing liability insurance and/or including contractual language that narrows the scope of your company’s liability. While having insurance might not prevent your business from being sued, it can reduce the impact of a legal proceeding. Each business is unique and so are its needs. As a result, you should identify what potential risks your company faces and find a policy that best fits those needs. The broader your coverage, the more you can minimize the impact a lawsuit could have on your business.

Contractually speaking, including a limitation-on-liability provision within your agreement could help narrow the scope of your business’s exposure to liability. A limitation-of-liability clause may establish the maximum liability or exposure your company faces if a dispute does arise. An additional way to limit your liability is to include an indemnity provision in your contract. An indemnity provision is a promise by one party to pay for potential losses or damage caused by another.

5. Keep Organized Records

A final way you can protect your business from being involved in costly litigation
is to make sure you keep organized and detailed records. You will be in a much better position to respond to customer complaints and, if needed, defend yourself in a litigation matter, if you are able to easily access the relevant documents. Simply stated, being able to assemble the relevant material quickly and efficiently will save your business both time and money.

Despite all of your best efforts to keep your business out of court, you may face the unfortunate reality that sometimes lawsuits are inevitable. If your business does find itself involved in litigation, the above tips should help you defend your company.


Aubrey Zuger

Aubrey Zuger is a litigator who represents clients in a wide range of complex business matters. She can be reached at [email protected].

Abigale Griffin

Abigale Griffin is an associate who represents clients in a range of regulatory and compliance litigation matters. She can be reached at [email protected].

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Brady Drake is the editor of Fargo INC!