Even the threat of litigation is enough to keep business owners up at night. Studies have shown that a large percentage of businesses are involved in some form of litigation in any given year. Being involved in an active lawsuit is costly for businesses, takes the owner’s time away from the business, and causes a great amount of stress for business owners and their families. Ultimately, litigation could also lead to a business permanently closing its doors.
When business owners do find themselves in a legal dispute, it is not uncommon for them to fear the unknown. To help business owners reduce their stress, our Santa Monica business lawyer has answered the most frequently asked questions below.
What Causes Litigated Disputes in Business?
Most litigated business disputes involve one party breaching a contract. These lawsuits can arise between an individual or a business, or between two businesses. The majority of these disputes are caused by contracts that are ambiguous, unclear, and incomplete.
Partnership disputes also often end in business litigation. Sometimes, what works when two people are friends and have a great business idea does not work as well when there is an official company and other people, such as employees, involved. Partners may disagree about which person should act as the CEO, or even when it is time to sell the business
Business owners also sometimes find themselves in litigation when they are in a dispute with employees. These litigated cases typically involve non-disclosure agreements, non-compete agreements, and the assignment of intellectual rights.
Are Estimates Legally Binding?
Generally speaking, no, estimates are not considered contracts and so, they are not legally binding. However, it is not uncommon for customers to treat estimates as contracts and file a lawsuit when the estimate is not the same as the final cost. Even though estimates are not legally binding, there are steps you can take to avoid this litigation.
Always include a disclaimer within your estimates that outlines a time frame for which the estimate is valid. Customers are then unable to come back to you two years from the estimated date and try to expect you to perform work for the same price you quoted when the cost of materials was lower. You should also include within the disclaimer that the price may change if there is a change in the scope of work, or an extenuating circumstance arises. This will prevent customers from asking for additional work without intending to pay for it.
Can You Alter the Terms of a Contract?
The only way to alter the terms of a contract is to obtain the consent of all parties involved. Phone contracts, gym contracts, and other agreements that are renewed on a regular basis are easier to alter, as you can send customers new copies of the contract as part of their renewal. You should never use an addendum attached to an email or a customer’s invoice to significantly alter the terms of a contract. This does not necessarily constitute an agreement of all parties involved.
Additionally, if the addendum or disclaimer is written poorly, customers may not understand the new terms. If that is the case, the customer may complain about reduced service when they did not pay an increased rate, or worse, they may file a lawsuit against you for trying to bill them at a higher rate than that to which you had agreed.
Do I Have to Pay for Services if I am Unhappy With Them?
No one wants to pay for services they are not happy with, and that includes business owners. However, determining if you must pay for those services is a complex matter. The answer will depend on the scope of the work you agreed to with the other party, the standards you expected to be met, and who or what was to blame for the unexpected outcome.
If you do not believe you are responsible for paying for a service because you were not happy with the result, you should speak to a business litigation lawyer. An attorney can advise you on certain obligations you will have to meet. For example, even if you do not pay for services rendered, you may still be obligated to return unused materials or pay for certain materials that have already been used.
What Can I Do if Customers Do Not Pay Me?
Another common legal dispute that arises in business is the issue of non-payment. You may be able to file a lawsuit against customers that do not pay you, but it will still be a lengthy and costly endeavor. You can avoid some of this litigation by setting clear time frames for payment, and by requiring customers to pay overdue balances before you render further services. You can also sell the debt to a debt collector, but you need a strongly written contract before doing this, as well.
Will My Dispute Go Through Mediation?
The answer to this is that it depends, and it largely depends on the contract between you and the other party. Sometimes, contracts require mediation whereas other times, you can enter litigation to settle the dispute. Mediation has several benefits, including the fact that it is a cheaper and shorter process than litigation. However, there are some downsides, as well.
For example, if you do not settle your dispute in mediation, you may be barred from bringing the matter to court, depending on what the contract states. It is still important to have legal representation when going through mediation, as the outcome is usually legally binding.
Our Business Litigation Lawyer in Santa Monica Can Help With Your Dispute
Litigation may be a common fear among business owners, but you do not have to go through it alone. At Klein Law, our skilled Santa Monica business litigation lawyer can advise on the strength of your case, and help you through the process so you recover the full damages you deserve. Call us today at (310) 295-2261 to schedule a consultation and to learn more about how we can help with your case.
