5 Causes of Business Disputes and How to Avoid Them
Reading Time: 5 minutes It does not matter if you have a thriving business partnership, things can always go wrong at some point. These disputes often occur due to several different reasons including finances and personal conflicts among others. If these disputes are not mitigated, they can easily hamper the terms of a signed agreement to be implemented, which often results in lawsuits due to breach of contracts.
If these business disputes are resolved swiftly, they can pose significant threats to the vitality of any business. That is why business entities must have professional litigation lawyers to help out in case such instances occur. Finding a commercial litigation lawyer for partnership disputes should not be a tough endeavor, as long as you know where to look. These litigation lawyers will prove to be very handy when it comes to resolving partnership disputes and disputed trusts in businesses.
To protect your wellbeing and that of your business, you need to understand some of the most common business disputes and how best you can mitigate them. Here is a list of 5 of the most common business disputes that an entrepreneur should know and how best to avoid them.
Table of Contents
1. Breach of contract
Virtually everything in the world of business runs on contracts. Contracts are the backbones of any business or professional relationships because of the glue these relationships together while sealing off any loopholes. When one party of the contract fails to live up to its contractual obligations, there are always dire repercussions. This is what is referred to as a breach of contract and it is the biggest reason behind many business disputes.
Some of the most common instances of breach of contract include:
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- Missed deadlines: When one party fails to meet the stipulated deadlines even just by a few days, it is tantamount to breach of contract and can end up in a lawsuit.
- Lack of payments: if a party to a contract fails to make payments as required, disputes can easily arise because it might destroy a partner’s budget or mode of operation.
- Unperformed obligations: if you don’t perform as expected or don’t meet the required obligations, you might cause a dispute due to breach of contract.
To cushion yourself from such instances of business contracts, you need to:
- Draft clauses for dispute resolution to help you map out the course of action in case of a dispute.
- Write everything down to back your oral commitment to act as a point of reference in case things fall apart.
- Avoid instances of miscommunication by ensuring that everyone involved is on the same page.
2. Shareholder disputes
If there are any cases of disagreements within or with shareholders, a business can easily take a downward trajectory. Some of the most common shareholder disputes arise because of:
- Conflict of interest.
- Debts and financing issues.
- Decisions relating to management and hiring.
- Long-term strategies.
- Breach of thee fiduciary duties.
- Embezzlement or misappropriation of company funds.
Most of these issues are faced in small and medium enterprises that are still on the growth face. One of the most practical ways of avoiding instances of shareholder disputes is setting shareholder agreements and bylaws that lay out the company expectations clearly to both the members and shareholders.
3. Labour and employment issues
These issues are bound to happen at some point when running any business. The signing of the employee handbook or agreements does not guarantee that employees will abide by the company rules and regulations. Employs can engage in harassment, fail to perform to the required expectations or breach non-compete agreements or confidentiality agreements too.
One of the best ways to go about this or to avoid such cases developing into disputes is by creating a rock-solid employee handbook or agreement then have them sign so that if they fail to live up to it, they can be laid off with just cause. You will avoid facing employment litigation.
Furthermore, ensure that you have a good litigation lawyer and a paper trail to back you if an employee chooses to sue you for wrongful termination.
4. Confidentiality
Different businesses have their own sets of secrets and if these secrets find their way out, it could be disastrous. Every business needs to be confident that its secret cannot slip out while in operation. That is why several businesses have their contractors and employees sign confidentiality agreements. Such agreements should plainly state the repercussions of failing to live up to the agreement signed. If these secrets slip out, the party responsible should be taken to account and this is bound to cause a dispute.
Some of the most common reasons why parties might choose to breach confidentiality agreements and trade secrets include learning the competitor’s advertising strategies, sales methods, business operation and hiring strategies among others.
Therefore, to mitigate the dispute from stretching further, swift action should be taken against the offending party. This ensures that the flow of confidential information is stopped immediately to prevent it from flowing too far.
5. IP infringement
The world of technology is rapidly evolving and that means that different businesses choose to use the technologies they use to give them an edge over their competitors. This makes intellectual property (IP) a very instrumental part of any business. This may include patents, trademarks or copyrights. The use of these is limited to your business alone until the stipulated time elapses. Therefore, when another business uses them for profit, you have the right to seek damages.
To avoid such disputes, you have to ensure that first of all you are not using any other firm’s IP without legal backing. This will go a long way in avoiding any charges that could be levied against you. Have all the facts so that in case charges are levied against you, you know how to handle yourself.
Summary
In any business, whether new or old, it is important to ensure that everything you do is in writing. Involve the help of a commercial litigation lawyer to help you in every step. Litigation lawyers will guide you through all elements of confidentiality, IP infringement, breach of contract and shareholder disputes to help your business save a lot of time and money to focus them on development.
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Co-Authored With
Delan Cooper is a writer with years of experience in marketing communication. He enjoys meeting new people and reading more books to get inspired by his own book. Connect with him on Twitter.
That makes sense that a breach of contract would be the most common business dispute. I could see how someone could easily make a mistake that would breach the contract, and make it harder for the other business. If I am ever in that situation, if I decide to start my own business, I'll make sure that I get a good lawyer to help me sort it out so I could avoid any more legal trouble than is necessary.
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