For business owners, engaging in business transactions is a crucial part of their daily operations. Examples of transactions business owners engage in include buying inventory from a supplier, selling goods to a customer, buying insurance from an insurer, paying wages to employees, and selling shares to investors. Regardless of the type of transaction, business transactions can present several risks that could result in disputes and litigation. Unfortunately, when a business transaction dispute results in litigation, it can lead to you and your business incurring substantial legal costs. Litigation can also lead to your business having a bad reputation. Fortunately, many business transaction disputes can be avoided.
Below, we look at some strategies you can implement as a business owner to prevent business transaction disputes, protect your business from unnecessary legal battles, and maintain healthy business relationships.
A well-drafted contract is one of the most effective ways of preventing business transaction disputes and litigation. When making an agreement with employees, suppliers, customers, or any other party, ensure the agreement is carefully constructed. Ensure contracts are specific about things such as expected quality, obligations, payment terms, time frames, dispute resolution procedures, and termination. Additionally, contracts should leave no room for misunderstandings. Ambiguities or vague terms should be avoided, and all crucial details should be included in the contract.
It is crucial that before you enter into a business transaction with another party, you conduct due diligence and risk assessment on the other party. Due diligence and risk assessment entails investigating the other party’s credibility, reputation, track record, and financial stability. It involves verifying if the other party is capable of fulfilling their obligations before you enter into the transaction. By conducting thorough diligence and risk assessment before getting into business transactions, you can avoid doing business with unreliable parties and, thus, reduce the risk of business transaction disputes.
Engaging the services of a qualified business attorney when drafting a contract is crucial. An attorney can ensure an agreement is well-drafted. They can ensure a contract is clear, comprehensive, and tailor-made to your specific situation. A skilled business lawyer can help you review an already-prepared contract. Additionally, a qualified business attorney can advise you on the potential risks you may encounter that can result in disputes.
It is vital that you and the other party maintain open and continuous communication throughout the transaction process. This can help prevent misunderstandings.
Sometimes, business transaction disputes happen even after you draft a clear and precise contract, conduct due diligence, involve an attorney, and maintain open and continuous communication. For this reason, it is vital to include dispute resolution clauses in contracts. By having dispute resolution clauses in contracts, you can avoid costly litigation. Mediation and arbitration are two alternative dispute resolution methods you can include in a business transaction contract that can enable you to resolve business transaction disputes faster and in a less adversarial manner.
To learn more about how you can prevent business transaction disputes, contact our skilled and dedicated business attorneys at SAC Attorneys LLP.