It is impossible to be a business entrepreneur and expect to avoid conflicts and confrontations that may or may not result in disputes and/or litigation. Such disputes may arise from the various relationships between the business owners, employers and employees, the business and suppliers and the business and clients.
Litigation is expensive, time consuming and often physically and mentally draining on the business entrepreneur. I am not for one moment suggesting that litigation may not be the appropriate remedy taking the circumstances into account, however, the ability of an entrepreneur to be successful when the need arises to litigate often depends on a number of choices that the entrepreneur has made in the past. There are a number of tried and tested steps that the entrepreneur should follow so as to avoid litigation arising, and if indeed it arises, to litigate successfully. A few of these are as follows:
- Have clear and concise contracts in place. Contracts must ensure that each party clearly understands their respective rights and obligations and the consequences of failure.
- Scenario plan with your attorney all potential causes of disputes and conflict within your specific business and then ensure that the contract addresses each of the causes of dispute and conflict.
- Prior to entering into any long term business arrangement, conduct a proper legal, financial, and technical due diligence so as to have a clear and concise understanding of the other parties’ ability to perform in terms of the contract. If unsure, put in place performance and payment guarantees.
- If the contract deals with the payment of money to your business, make sure the issues set out in my article: “Business Entrepreneur: Collecting your money” have been addressed.
- Deal with contract breaches promptly and in accordance with the contract terms. Many entrepreneurs who otherwise have strong legal positions often undermine the strength of their position by their very own conduct. Consult with your attorney and avoid this at all costs. Follow the process provided for in the contract as they are there for a reason. This is particularly applicable where the contract provides for breach notices and remedy periods particularly where the breach is not material.
- Entrepreneur, plan for litigation and the consequences thereof particularly when the litigation is in respect of an essential part of your business. In supply contracts, it may be necessary that the contract specifically deals with the withholding of supply or services or the continuation of supply or services while the parties are in dispute or attempting to resolve their dispute. Many suppliers will withhold the supply of goods or services in the event of a dispute so as to compel a business owner to settle matters in their favour because the business cannot operate without such supply or services.
Over the last few months, Covid-19 and the consequences thereof has resulted in the closing of many businesses. It is however sad that in many of these instances, the reason for the business closing has less to do with Covid-19 specifically but rather the failure of the entrepreneur to put proper contracts in place. See article: “Business Entrepreneur: Covid-19 (Corona Virus) your business and contractual performance”.
For further information, please do not hesitate to contact us.