Anyone who’s been through litigation knows how messy, expensive, time-consuming, and stressful it can be. Thus, it is a wise entrepreneur who avoids getting sidetracked into a legal battle.
After all, there’s no guarantee that one can win in a litigious contest. Each of the three points-of-view in the case—those of the two contending parties and that of the judge—bears weight on the final result, with the business owner having control over only one.
It is therefore advisable for the entrepreneur to adopt a prudent risk management policy that evaluates and measures potential litigation risks and develops strategies to address them. One such strategy can very well be avoiding litigation altogether.
To avoid litigation, an entrepreneur should be conscious of the business areas where the highest potential for liability exists. For example, companies that rely heavily on a huge labor force would be at greater risk of facing labor cases; they should therefore be meticulous in setting an employment policy. Appliance retailers for their part would have more potential litigation risk arising from defective goods, so they should be keenly aware of manufacturers’ warranties on the products they are selling. And for obvious reasons, those who manage daycare centers should always keep a tight focus on safety.
In businesses heavily regulated by law, to have a working knowledge of the pertinent laws would be a good first step to avoiding the risk of violating them. In the case of a drugstore, for instance, the owner should know all the laws that pertain to the sale and distribution of regulated drugs.
Ordinarily, however, disagreements that give rise to litigation often result from daily transactions and dealings. There is therefore hardly a better advice for interacting with people than to follow the ethic of reciprocity or more popularly known as the Golden Rule: “Treat others as you would like to be treated." Stated otherwise, “Don’t treat others in a way that you don’t want to be treated.” This applies equally well to business—to your customers, clients, suppliers, and service contractors—as to interpersonal relationships. Just putting this rule to practice can greatly reduce the risks of litigation.
It is also a good habit to put in writing all business agreements and understandings even if they only involve simple transactions. It is when such dealings are not properly documented that disagreements usually arise. People have a peculiar way of recollecting past events that tilts things in their favor when the time of reckoning comes, and rare is the contending party that agrees with the other’s interpretation of events.
Also, when drafting a document, the goal should be to make it as clear as possible to avoid any misunderstanding. If goods are being ordered, it should be stated in the clearest possible terms: the kind, the specific brand; the model; the number, weight, volume, and description; and the exact address where the goods are to be delivered and at what time. The parties are well advised to also stipulate the consequences of delay or non-delivery. Will there be a reduction in price, an increase in volume, a credit for future orders, or a cancellation?