Litigation, while sometimes unavoidable, is an expensive and time-consuming process that can produce unpredictable results. In the context of business transactions, the best way to avoid litigation is to anticipate the potential for future problems – including “worst case scenarios” – and to structure transactions so as to minimize those risks. This advice may seem obvious; but in practice, timing and other pressures may lead to the finalization of a deal that has not been as carefully structured or vetted as it otherwise should have been under more ideal circumstances.
With these considerations in mind, here are a few tips to help keep your business out of the courtroom.
Put It In Writing.
By their nature, oral agreements are problematic because they give way to the classic “he said, she said” dispute. Additionally, in some circumstances – take real estate sales, for instance – the statute of frauds requires agreements in writing to be enforceable. Memorializing an agreement in writing – preferably, with an integration clause specifying that the agreement contains all of the terms that are part of the deal – helps to reduce the risk that the other party will later attempt to claim that there were oral promises outside of the parties’ agreement.
Resist the “DIY” Temptation.
With access to information literally a click away, it may be tempting to take a “DIY” approach to drafting legal documents by relying on “samples” that can be accessed and downloaded online. The internet, while a useful resource, is also notorious for providing misleading or downright false information. Legal documents are only as good as their drafters, so a legally suspect “sample” may give way to a “final” document that is equally problematic. Moreover, even if the information presented in a “sample” is accurate, it may contain terms that are inapplicable to the situation at hand, or, worse, that directly conflict with the intentions of the parties. This can create ambiguities leading to legal disputes. Consulting with an attorney for review and drafting assistance helps to better ensure that legal documents are clear and unambiguous, and that the intentions of the parties have been honored.
Conduct Due Diligence…
Before entering into a business deal with another company, make sure the company is active and in good standing in the state in which it is conducting business. (In Michigan, entity searches are available on the Department of Licensing and Regulatory Affairs website.) Further, conducting due diligence – including investigating key aspects of a business transaction, along with the individuals and companies involved – helps to ensure that the final business deal is consistent with the expectations of the contracting parties.
… But Trust Your Instincts.
Finally, as the saying goes, if it sounds too good to be true, it probably is. Promises of outsized returns on investment are the most obvious scams, but fraudsters are developing new schemes as quickly as they can be ferreted out.
As any seasoned business person knows, it is impossible to completely eliminate the risk of litigation. Nonetheless, this risk can be substantially reduced by taking proactive steps to protect personal and business interests.