Blog Details

What makes a smart manager stand apart from a manager is his vision and realistic bend of mind. All managers know that common business disputes , which go on to become expensive legal suits , keep the potential of damaging reputation of the business , almost breaking fiduciary relationships and taking away from the business a lot of vital resources. But smart managers know that these disputes, if are increasing alarmingly then they are also increasingly avoidable. The only reason why they grow to such an extent is because of the space given to such disputes that help them thrive. Smart managers, thus know why it is imperative to nip these disputes in the bud and they certainly know how that is supposed to be done.

What are the most common and avoidable business disputes?

The following common disputes can be settled both inside and outside the court room.

1. CONTRACTUAL DISPUTES

Contractual disputes take into account a variety of issues, ranging from contestation on the performance of a contract to inability to discharge the obligations or duties under the contract i.e. breach of contract. Breach of contract can also occur due to partial or incorrect execution of the contract. The most common examples of breach of contract can be missed deadlines, substitution of materials specified in the contract or non-payment or delayed payment for goods and services.

The breach of contract or any such contractual dispute can cost the business heavily and tarnish its image. The best way to avoid such disputes is to learn from the past experiences and be more sincere and elaborate while drafting the contracts. Make sure you follow the given points so that the breaches and disputes don’t go out of hand.

• Prefer written contracts over oral contracts. There is no doubt that verbal contracts are binding under the law, but for keeping proper records and making the contract more authentic and reliable it is advisable to have a written agreement, so that each party to the contract is held accountable for the promises made by them.
• Keep doubts, ambiguity and miscommunication at a bay.
• Formulation of dispute resolution clause while drafting corporate contracts is advisable.

2. Professional Dereliction

New entrepreneurs aren’t masters of every field pertaining to their businesses and hence, rely on professionals like accountants, lawyers and their advice for achieving perfection in those few strategic fields. However, professional advice may give rise to the claims of professional negligence, which is another common business dispute faced by the businesses. Such claims arise when a professional or a competent party gives incorrect advice, due to which the business has to suffer some substantial loss. The company then has the right to take a legal action against such counsel, even in the absence of any contractual agreement (in the case the professional assistance doesn’t match up with the reasonable industry standards) Adherence to these simple rules can save your business from getting involved in this dispute.

• Ensure the authenticity and reliability of the professional, whose services you want to hire. Find out if the professional has enough experience in dealing with the kind of problem you have or the area you are concerned with. Make sure the professional you engage has the resources to advise you on different aspects of your business.
• Select a professional via a referral whenever possible.
• Allow no ambiguity while deciding time limits. In case of doubts ask for explanations and clarification. Do not turn a blind eye to the professional’s work.

3. Shareholder Disputes

This is again a common business dispute faced by the company. The major shareholders of the company indulge in controversies over major business decisions. Lack of key strategies and adequate future planning trigger such disputes. Shareholder disputes usually arise due to denial or reduction in the dividend payments or due to undocumented use of IPR when a shareholder leaves the company.

In a bid to avoid shareholder disputes, it is important to have a shareholders’ agreement, which specifies the voting powers of the shareholders and the dividend payments too. It should also talk about how the disputes will be resolved, in case they arise.

If you sell shares to raise equity for further growth, ensure any new shareholders sign a Deed of Adherence, which will bind them to the existing Shareholders’ Agreement.

4. Employment disputes

Employment disputes occur in every organization. These disputes are mainly in relation with terminations, acquittals, perks and monetary benefits, discrimination, personal grudges with the management etc. the extent to which such disputes are present in an organization depends upon the employment contracts, quality of human resource and coordination and understanding between the management and employees.

These issues are inevitable and can only be minimized by carefully drafting employment contracts. Keep the contracts as detailed and as comprehensive as possible. Don’t leave any room for misinterpretation on the part of the employees. Also, the employment contracts should be in line with the employment laws of the state.

5. Inter-business disputes

Organizations function in a dynamic and composite business environment in which other entities also operate. As a result, businesses clash against each other either outside or inside the court room. These disputes generally range from employee poaching, trademark or patent infringement. In these types of situations, counsel that is well-versed in litigation and litigation avoidance is a must.

How Can Business Disputes be resolved?

If certain disputes are avoidable then certain are inevitable and unpreventable. The trick lies in the art of adopting sound techniques for dispute resolution. Yet, if you aren’t able to resolve the disputes internally, there is nothing wrong in reaching out for help. If your business is unable to prevent claims, you may want to rely on small claims court for resolving outstanding bills, debts, or employment issues when damages fall within the small claims’ limits. Reliance on Alternative Dispute Resolution (“ADR”) clauses in business contracts for finding solutions to the contract related disputes yields effective results. ADR further includes arbitration and mediation for solving disputes without seeking legal remedy.

Arbitration is a process for resolving a dispute between two parties outside of the court system but is similar to a trial in that both parties argue their case to the “arbitrator.” The arbitrator listens to the disputing parties’ problems and arguments then decides on a resolution.

Mediation is a type of negotiation between multiple parties facilitated by a neutral third-party (the mediator). Mediation is unlike arbitration in that the mediator does not make a decision regarding the parties and the resolution; instead, the mediator’s sole responsibility is to try to help the parties come to a resolution on their own.

If the parties cannot resolve their dispute outside of court, one party may have to file suit against the other and take the proceeding to court.