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Disputes

Disputes and disagreements are a normal part of the operation of any business. It is important, however, that they be resolved quickly and effectively in order to minimize costs and avoid interference with business operations. Disagreements can occur with customers, with vendors, with other businesses, between owners of a business or with employees. Each type of dispute requires a different dispute resolution technique.

Disputes With Customers
Customer disputes that require legal counsel are usually the result of misunderstood or unclear contractual provisions. Many of these types of disputes can be avoided by initially ensuring that all written contracts are simple, clear and straightforward. Often a quick legal review of a proposed contract can significantly reduce the risk of such disputes. Simple modifications can be implemented to avoid future difficulties. For disputes that have already occurred, the dispute can usually be resolved in a satisfactory manner by (1) carefully reviewing the contract to determine initially the strength of your position and (2) negotiating a mutually satisfactory resolution using an appropriate negotiation strategy.

Disputes With Vendors
Relationships with vendors are usually governed by a contract that has been prepared by the vendor and that is presented for your signature. These proposed contracts often contain provisions that are favourable to the vendor. A legal review before signing these types of agreements can be very helpful in avoiding future problems and disputes. Very often simple modifications can be made to the proposed agreement by deleting a sentence, a word or a paragraph.

If a dispute arises after an agreement has been signed, the initial step in the resolution should be a legal review of the agreement to determine the strength of your position. When you understand your contractual obligations, it is much more likely that a satisfactory resolution can be achieved.

Disputes With Other Businesses
Disputes with unrelated businesses often arise because of a misunderstanding by one of the businesses of the actions of the other. Your business can avoid these disputes by ensuring that policies and procedures are followed and that the day-to-day operation of your business does not violate the proprietary rights of another business. A legal audit of your business will often prevent these disputes from arising. Disputes that do arise can often be resolved with negotiations. Litigation should not be viewed as a preferred method of resolution as it is costly and will distract you from running your business.

Disputes Between Owners
When there are multiple owners of a business there are often disputes with respect to the distribution of the profits of the company or in the relative ownership percentage. These disputes can often be avoided by ensuring that Shareholder Agreements and Management Contracts are executed by the shareholders when the business is established. Even if your business is operating and there are no disputes today, you should consider executing Shareholder Agreements and Management Contracts.

Often the business relationship and the respective rights of the multiple owners was determined when the business was in its infancy - at a time when there was not sufficient funding to obtain a legal review of the documents establishing the relative rights of the owners. Accordingly, there may be some ambiguity or lack of clarity with respect to the ownership rights.

The best way to resolve a dispute among business owners is to avoid it by having agreements in place before the dispute arises. Litigation should be the last resort because the litigation process and the consequent polarization of the parties seriously interferes with the effective operation of the business.

Disputes With Employees
Many employee disputes and lawsuits occur because businesses fail to clearly define the employment relationship with the employee from the outset. Employees can make or break a business. Often , they come to know more about your business than you do. An effective Employment Contract should clarify the responsibilities of the employee and protect the business by specifying the ownership of inventions, intellectual property and proprietary information. An Employment Contract can reduce the risk of disputes over ownership, the payment of wages and bonuses, vacation entitlement and the employee’s responsibility to protect your business and trades secrets even after you no longer employee him or her.