Top Five Mistakes Businesses Make

Having litigated and tried business disputes and commercial litigation cases for over twenty years, several issues have emerged that seem to cause lawsuits more than any others.

1. The businesses and individuals haven’t memorialized the deal. Whether the deal is forming a limited liability company, hiring an employee (or independent contractor) to develop some piece of technology, or simply agreeing to buy something for some amount, it should be written out and signed by both parties. A simple email may suffice and is usually better than nothing. However, the more complex the arrangement, the more complex the written document should be. Nobody can predict every possible dispute, but the contract should address what happens if disputes arise.

2. The documents aren’t signed. It happens. Sign the documents.

3. The parties agree to changes, but don’t sign off in writing. Again, a simple email may suffice. This is especially true on construction projects with change orders. Follow the requirements in the contract, but at the very least memorialize the terms of any change and send to the other party.

4. Attorneys’ fees provisions are omitted (or included). The availability of attorneys’ fees to a prevailing party in contract cases can be a powerful tool to dissuade litigation. Remember, though, that these clauses typically work both ways.

5. Arbitration isn’t considered. While arbitration can be just as expensive as litigation, it can offer several benefits. Among other things, the parties can often choose the scope of permitted discovery (if any), the timeframe for a decision, and who hears the case. It is usually advantageous to have someone experienced in the industry hear an industry-specific dispute. For example, arbitration clauses are almost ubiquitous in the construction industry. Arbitration does have drawbacks – most significant is the limited appeal rights to the losing party.