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5 Tips to Avoid Litigation in Your Small Business

5 Tips to Avoid Litigation in Your Small Business

The thought of litigation can make any small business owner cringe. In addition to the emotional stress, there are also the financial aspects that place a great deal of strain on the business.

Appointing one of the top commercial lawyers Melbourne and other Australian cities rely on, is only one way toward preventing litigation. There are also several other steps that you can take within the organisation.

What Exactly is Litigation?


Litigation refers to the process where a dispute between two parties has to be resolved through court proceedings. The cause of litigation stems from one of the parties not adhering to or honoring an agreement or contract.

The process of litigation can be between the company and an employee, between a company and a client or even between a company and one of its vendors or suppliers.

Litigation can be costly and time consuming. It can also cause irreparable damage to your company’s reputation.

Preventing Litigation – Easier Than You Think

While litigation is often the only means to resolve a serious dispute, it should never be the first course of action.

There are a few other steps that business owners and managers can take to keep the issue out of court. Let’s take a closer look at some of the first line of defense measures you can take.

1. Create Agreements & Contracts in Writing


It’s very easy for the lines of verbal agreements to start getting blurred when one party doesn’t agree with the actions of others involved in the original arrangement. The number one rule in your business should always be to have everything in writing.

It’s crucial to have written contracts in place between partners, employees, customers, vendors and suppliers. Contracts should state the basic conditions required to perform each party’s function within the organisation.

The documents should also detail the consequences of non-adherence to the agreements.

2. Ensure Communication is Regular and Clear


Despite so many different mediums of communication available in a digital world, it’s easy for attempted communications to be misunderstood or taken out of context.

When it comes to important business matters, ensure communication is clear and detailed.

Follow some of these communication tips:

  • Never discuss important company business over an SMS, WhatsApp, email or on social media. This includes changing working hours or schedules with staff.
  • Arrange a meeting with relevant parties and discuss the issues at hand. Ensure a neutral party records minutes of the meeting that are then given to all parties.
  • While emailing is a convenient, non-confrontational way to share information, emails can also be taken out of context and used against you. Rather do a face-to-face meeting whenever possible.
  • If an in-person meeting isn’t possible, arrange a ZOOM or Skype meeting that includes a third neutral party and record the meeting.

Clear communication between parties can often resolve the situation. It could help your case to understand the other person’s point of view. It might also assist you with finding a resolution that doesn’t involve going to court.

3. Always Keep Accurate Records

One of the best ways to avoid litigation is to keep accurate records of the entire process. This includes all transactions between your company and the relevant parties.

Detailed records make it easy for commercial lawyers to sort through all the chaos and find resolutions that won’t cost your company exorbitant amounts of money. Accurate records will identify the party at fault or the point at which the agreement was breached.

4. Learn to Compromise


Receiving occasional complaints about the organisation’s services or products is a normal occurrence. Find ways to reply to these complaints timeously and be prepared to compromise.

It might mean suffering a short term loss but doing this will preserve the relationship with a customer or vendor for future business.

For instance, if the issue involves damaged goods that were delivered to a client, opt for replacing the products rather than having the customer choose ligation as a solution.

Often, resolving the problem in this manner will be a lot cheaper, and less time-consuming, than drawn-out court battles.

5. Educate and Train Your Staff

Another clear way of avoiding a considerable number of issues is to ensure that the staff dealing with other parties on the organisation’s behalf are trained.

Employees should always know what they are allowed to do—and not do—in their dealings with customers and vendors. For example, train employees to not make promises on turnaround times that breach those covered in service level agreements.

Final Thought

Litigation processes can cost a company thousands of dollars. Additionally, being tied up in court with one issue takes your time, focus and energy away from promoting and enhancing your business.

Also, if your organisation is found to be in the wrong it could result in your company having to compensate the other party financially.

You could also be ordered to cover their legal costs. Depending on the financial state of your business, this could seriously hamper your business from being able to continue. Be proactive! Consult with a commercial lawyer to avoid business issues before they happen.

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