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Avoid Lawsuits: Practical Tips

Many business owners believe lawsuits are unavoidable. Business owners, however, do have significant control over them. Here are a few tips (if you're a business consultant, pass them on):

Rude gets sued. This is not novel, and examples are numerous. Each business should serve its primary profit goal, and should not be weighed down by hurt egos. It should treat employees, customers, and vendors alike with respect and courtesy, and should resolve disputes quickly and amicably. Do not give anybody an emotional reason to sue.

Also, pay close attention to how correspondence is written. Make sure letters and e-mail are respectful and courteous. Read them carefully beforehand to ensure the message is clear and professional. Consider having someone objective read it beforehand.

Put contracts in writing. Many breach-of-contract lawsuits involve misunderstandings about contractual terms. Although many oral contracts are enforceable, they are by nature susceptible to differing interpretations. Because of this and other pitfalls, it is important to put all material contracts in writing. Ensure the contract is written clearly and thoroughly, and ensure you read it and understand it. Discuss the contract freely with the other party to ensure everyone understands and agrees with their specific obligations.

Obviously, to avoid lawsuits, you should honor your contractual obligations. If you can't, discuss this issue freely with the other party in an attempt to create a reasonable business solution. Don't try to avoid your obligations by asserting harsh interpretations of the contract or non-existent loopholes. Remain reasonable. If you can't come to a solution among yourselves, consider involving a third party mediator.

Keep it ethical. Clearly, each business should ensure its operations are not violating the law. Today, however, each business should go further to ensure its operations are ethical, so that others aren't motivated to sue. Define your ethical boundaries and stick to them.

Educate your work force. Make sure your staff understands how to behave respectfully and courteously to everyone, how to enter into contracts effectively, and how to act lawfully and ethically. Do this through clearly stated job duties and guidelines.

Protect your intellectual property rights. The more your legal rights are indefinite, the more you give another room to sue and assert you have no such rights. Although unregistered trademarks, patent rights and copyrights may be enforceable, your legal rights in them are indefinite to a degree. Thus, you should immediately register all material intellectual property rights. While not a cure-all, registration significantly reduces the risk of battling over valuable intellectual property rights in court.

If your business wishes to effectively protect trade secrets, ensure you take protective measures beforehand through confidentiality agreements or information security systems so you aren't forced to protect those secrets afterward in a costly lawsuit.

Use lawyers. Paying a lawyer a few hours of time to draft a contract or register a trademark will reduce the risk of a protracted, expensive lawsuit. In fact, you should consider hiring a lawyer to perform a 'legal audit' to assess the company's overall legal risks and opportunities and advise you on how to handle such risks and opportunities. After all, an ounce of prevention is worth a pound of cure.

William Buus is a principal of the law firm Schiffer & Buus, APC, practicing complex business litigation. For More information, call Mr. Buus at (949)863-3282 or e-mail him at wbuus@schifferbuus.com.

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