What are your chances of being sued?
The answer may surprise you.
According to one report, one out of three small business owners has either been sued or been threatened with a lawsuit.
So the risk of a lawsuit is very real, and it’s unlikely to diminish anytime soon.
Simply put, the best way to deal with lawsuits is to avoid them. Here are three reasons why:
1. Lawsuits are expensive
No matter what kind of case you're involved in, lawsuits are expensive, perplexing, and overwhelming.
In addition to attorney's fees, you're facing filing fees, expert witness fees, court reporter fees, transcript fees, and many other costs along the way to trial.
According to courtstatistics.org, the average cost of a liability suit is $54,000. Contract disputes average around $91,000.
Litigation costs continue to rise as a percentage of a business’s revenue.
2. Lawsuits are time-consuming
The wheels of justice turn slowly.
The typical business lawsuit lasts from a year to a year-and-a-half. A complicated case can drag on for years.
3. Lawsuits are inherently unpredictable
The worst thing about business litigation is the whole process is out of your hands. You have no idea how long it will take, how much it will cost, or what the outcome will be.
When you get right down to it, lawsuits are a gamble, and you can’t be assured of a just outcome. Litigants go to trial at their own risk.
There’s only one sure way to avoid the costs and disruption of a lawsuit:
Stay clear of lawsuits entirely
To protect your business from costly litigation, here are 4 common mistakes to avoid.
1. Bad Business Deals
It may sound obvious, but most lawsuits are caused when somebody makes a bad deal.
Contract disputes are the number one source of liability for businesses. In general, contract disputes typically arise from one of two things:
a) Having poorly written agreements, or
b) Relying on an oral agreement.
It’s tempting to agree to terms of a verbal contract with a handshake, especially when you’re excited about getting a new client or business partner.
Don’t, however, do anything until you have a clear, written understanding of the terms, and an attorney has reviewed the written agreement.
Good fences make good neighbors.
2. Failure to Communicate
Often times, lawsuits are caused by communication failures after the problem occurs.
In any type of conflict, a common response is to bury your head in the sand and ignore the complaint. Other times, you may become defensive about it and cause the problem to escalate.
If there is no effective communication and no productive way to resolve the problem, you are likely to end up in a lawsuit.
You don't have to agree that one person is right and one person is wrong. Just keeping an open line of communication can prevent many lawsuits from being filed.
3. Lack of Due Diligence
You would be amazed how often smart people enter into business relationships with dubious characters. Before you sign anything, make sure you know who you're dealing with.
If your potential customer or partner has a history of litigation, or has served time in prison for fraud, you should find this out before signing a contract.
Be objective about the potential person’s background. If it looks bad, don’t let him or her explain away what is obviously a problem.
4. Waiting Too Long
Most small businesses put off hiring a lawyer until after they’ve been sued.
If you’re being sued, it's too late.
Once you’ve been served with a summons and complaint, the problem has already occurred. Then, it's just a question of how much you will have to pay --- in court costs, attorney fees, settlements, and other expenses --- to get the problem resolved.
The time to consult with a good business lawyer is before you get trapped in a lawsuit.
Paying a lawyer to keep you out of trouble is a fraction of what you’ll pay a lawyer to get you out of trouble once you’re in it.
To schedule a consultation with our office, contact us.