The following is a two-part article addressing the importance of identifying legal considerations in the commission of one’s business activities before it is too late. In this first article, the importance of legal counsel is addressed. In the second article, the various methods of conflict resolution will be explored.
Whom among us hasn’t either shouted at someone; or wanted to shout at someone, “I’ll see you in court!” In the course of conducting business, it is almost a guarantee that there will be conflicts, disagreements, and disputes. Whether with vendors or suppliers who do not perform as expected, customers that do not pay for products or services, or even business partners that fail to live up to expectations; the opportunity to threaten to take someone to court or to have the legal system intervene to resolve a business agreement gone wrong seems like a daily occurrence.
However, small business owners would be wise to consider their goals, options, and willingness to undertake resolving conflicts by having the courts decide outcomes. Attorney Jeffrey M. Haber (www.jhaberlaw.com) has worked for nearly three decades in helping bring closure successfully to business disagreements. His insights borne of both academic and practical experience are worth noting.
Ounce of Prevention
As entrepreneurs, it is well understood that it is recommended that one develop a relationship with various business professionals before their services are urgently needed. For instance, establishing a relationship with a banker and one with an accountant are urged by most business owners to avoid future problems. However, Mr. Haber has the following to say about doing the same with legal counsel:
“As the saying goes, ‘an ounce of prevention is worth a pound of cure.’ Establishing a relationship with a lawyer before there is a need has many benefits. For example, having a lawyer or law firm on retainer means that a business owner will have an attorney available whenever needed and for any reason. Additionally, having a lawyer on retainer can save the business owner money, which means paying a small amount on a regular basis to have them perform legal services for when they are needed. With this kind of arrangement, the client pays a monthly fee that reflects the monthly services required by the client. Retainer clients pay monthly in advance of services, so the lawyer can offer clients a discount (e.g., 10% – 20%) from what they would pay for regular hourly services. If the need does not warrant a monthly retainer, other arrangements can be negotiated (such as, percentage discounts using a “tiered” or “volume” structure – the discount increases based on the overall volume of work requested and performed in a calendar year).”
By having a relationship with a legal professional who understands the particular business’ strategies, ownership’s priorities, and the strength/health of the business, many conflicts can be quickly resolved through non-confrontational methods that do not require the intervention of the courts. Counsel can be offered to identify negotiating strategies, advice about contracting, and fair and equitable resolutions based on precedent and case law.
Further, in the event of a controversy involving amounts above the statuatory limit for small claims court, Haber adds, “It is always prudent for a business owner to hire a lawyer to represent him/her in disputes, especially if litigation is deemed to be the likely course of action.”
Good Contracts Avoid Court Contact
Of course, the business owner is not customarily a legal expert, nor is the business in existence to fill court calendars. Therefore, the AVOIDANCE of interacting with courts and the legal system is generally seen as a positive by most entrepreneurs. So, if the focus is on minimizing the opportunity for conflict and to avoid the distractions, costs, and time involved in resolving conflicts, Mr. Haber believes learning the components of a solidly written contract is essential. He maintains, “A contract is the foundation of business and commerce. It defines the relationship between the parties, shapes their expectations, and ensures that a meeting of the minds occurs before their performance obligations begin. To minimize the risk of a breach and to avoid the costs and distractions attendant to dispute resolution, business owners should make sure that their agreements are in writing. Many contract disputes arise because the parties were not clear about their obligations under the agreement. In some instances, disputes can focus on a word or a defined term in the contract. Therefore, before signing a contract, a business owner should ensure that the terms and conditions in the contract are stated clearly, capable of performance, and acceptable.”
He provides the following tips for avoiding contractual disputes:
Written Contract: A contract is a legally enforceable promise. It may be oral or written (although an oral contract is difficult to prove). A written contract is the best evidence of the parties’ intent to be bound by the terms and conditions of their agreement. With a written contract, a business owner will have a record of the offers and counter offers, acceptance and consideration up until the day the contract is signed. The passage of time and the lapse in memory will not, therefore, be an issue if a question or dispute should arise.
Know the Objective(s) to Be Achieved: A business owner cannot reach an agreement if he/she is unclear about the goal(s) to be achieved by the contract. The same is true for the party on the other side. Therefore, before negotiations begin, the business owner should identify each term of the proposed agreement, such as price, product quantity, deadlines for performance, quality standards, and services to be performed, to ensure that they match his/hers goals and objectives.
Be Clear: Define technical words, trade terms or words that can be open to interpretation. This can help avoid mistakes and misunderstandings during performance.
Hire an Attorney: An attorney can help a business owner draft and review their contracts or agreements. Having an attorney is especially important when the party on the other side has a lawyer representing their interests. Hiring an attorney levels the playing field and ensures the protection of the business owner’s rights and financial interests, while minimizing the risk of future litigation. Lawyers often make excellent negotiators. A good one can help the business obtain a better deal or consider alternatives to what is being proposed. In short, a lawyer who is involved in drafting and negotiating the contract is more likely to get the business an agreement that meets its needs and advances its goals.
To contact Jeffrey Haber to discuss your legal matters, he can be reached at: www.jhaberlaw.com, or at 212-209-1005.