Disputes among business associates, partners, and employees are very common. Regardless of the size of the business, disputes are almost inevitable, particularly if you have not taken the proper steps to try and avoid them. Even when you have taken certain measures, disputes can still arise and when they do, it is essential that you know how to handle them. Here are some of the most common business disputes and some tips on how to handle them.
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Breach of Contract
The business world relies on contracts, so perhaps not surprisingly, breach of contract is one of the most common business disputes. A breach of contract occurs when one party named in the agreement does not fulfill their obligations. Unperformed obligations, missed deadlines, and refusal to pay are some of the most common types of breach of contract. To avoid these disputes, it is important to put all agreements in writing, ensure all parties are on the same page, and include dispute resolution clauses within the contract.
Disputes among shareholders, key stakeholders, and LLC members have the potential to be devastating to a business. These disputes often involve:
- The long-term strategy for the business
- Misappropriation of funds or distributions
- Breach of fiduciary duties
- Hiring and management decisions
- Conflict of interest
- Financial issues, including debts
- Failing to capitalize the company
Shareholders may have disputes among themselves or with the owners of the business. Under the right circumstances, shareholders can also file a lawsuit on behalf of the business owners or LLC members. Shareholder agreements and bylaws are the best way to avoid shareholder disputes. Operating agreements that outline clear provisions and expectations of the company and member also help to avoid disputes among LLC members.
Businesses rely on professional advice and services. While you can never expect that all advice or services are going to be perfect, you should always expect the professionals you rely on to act in good faith. When professionals give bad advice or they fail to live up to industry standards, it could be an act of negligence. Some of the professionals most likely to act negligently are as follows:
- Management consultants
- Other licensed third parties
Any time a professional breaches their duty of care and it causes your business to suffer material losses, you can take legal action.
As a business owner, you have a lot of information you want to keep confidential. One of the biggest breaches in confidentiality is when an employee or other person steals trade secrets. Trade secrets can relate to certain manufacturing processes, recipes, sales methods, advertising strategies, or anything else that sets a business apart and makes them unique. The theft of trade secrets may result in the person that stole them using them for their own gain or informing a competitor of the trade secrets in exchange for a profit.
As a business owner, it is essential that you protect your trade secrets and other confidential business information. An NDA or confidentiality agreement is a great way to do this. Many business owners require employees and contractors to sign confidentiality agreements, which can make it easier to take legal action when someone within the company has violated the terms of the contract. When legal action is necessary, it is important to act as soon as possible to stop the information from getting out to competitors.
Intellectual property (IP) includes trademarks, copyrights, and patents. When you own this type of IP, it is yours and yours alone to use until it expires. If someone else uses your IP in order to make a profit, you can take legal action to recover material damages.
It is also important to know that many times, businesses will take action over IP infringement when they do not have strong legal footing to do so. When this happens, it is of critical importance that you understand the charges against you and that you fight for your rights. Too many people assume that if someone has filed a lawsuit against them, they are immediately in the wrong, but that is simply not the case.
Employment & Labor Disputes
When running a business, you will likely face employment and labor disputes at some point. Some of the most common include a breach of non-compete and confidentiality agreements, a failure to perform employment obligations, and harassment claims either against you or between employees within your business. It is important to have all employees sign an employment agreement at the time they are hired and to distribute an employee handbook that can help you avoid legal trouble. Employment agreements can help avoid employment litigation, particularly when you have terminated an employee with just cause.
How to Handle Common Business Disputes
Business disputes are very upsetting, as they can affect the entire future of your business. When someone negligently or intentionally hurts your business either through a breach of contract, breach of confidentiality, or other wrongdoing, it is important to take legal action as soon as possible. Contrary to what many business owners think, this does not necessarily mean filing a lawsuit and going to court. You may have many legal options available, including mediation or arbitration that can help you settle the dispute without going to court.
It is also important to vigorously defend legal action that someone takes against your business. Just as negligent or intentional wrongdoing can hurt your business, so too can legal action if someone is successful with their case. An experienced business lawyer like Beth Santilli can help you take legal action or defend against it.
Get Legal Help Today
If someone has hurt your business and you have suffered material losses—or if someone has taken legal action against you—our business attorneys can help. At Beth Santilli Law, LLC, our attorneys will advise you of your legal options and help you make things right. Contact us today to schedule a consultation so we can review your case.