How can organizations reduce their risk of a costly lawsuit?

A single business lawsuit can prove devastating for an otherwise successful organization. The costs of going to court can add up to tens of thousands of dollars, and a successful lawsuit could cost even more.

Beyond costs, there is the potential damage to a company’s reputation to consider. A lawsuit could make their products seem unsafe or their employment practices seem discriminatory. They may lose their competitive edge on the retail market and/or their ability to hire the best and brightest new talent.

Most businesses would, therefore, prefer to avoid business lawsuits whenever possible. How can organizations more successfully protect against the risk of expensive and damaging business litigation?

Employing very thorough, custom contracts

The right legal terminology in a business contract can make all the difference. From a very clear exploration of the company’s promises to a client or worker to specific standards for product delivery or customer payment arrangements, the terms included in the contract can help resolve a disagreement without the matter needing to go to court.

Many businesses will even include special clauses to further deter litigation. Mandated alternative dispute resolution is a common contract inclusion. Companies have begun to shy away from binding arbitration clauses, but they often require mediation before a client, employee or other party to a contract takes an issue to civil court.

Seeking to settle disputes privately

Business dispute mediation has become increasingly popular for a number of reasons. First of all, it is a private process that limits what information will become public record. That on its own can be incredibly valuable. Additionally, mediation often leads to the successful resolution of a disagreement about how a company behaved and what responsibilities it has to other parties.

Even though the company may maintain that it did nothing wrong, agreeing to a compromise is often preferable to taking a matter to trial, which could lead to larger expenses and more information about the claim becoming publicly available. The vast majority of business disputes do end up settling before going to court even if one of the two parties eventually files a lawsuit in civil court.

Organizations that recognize the risks of a lawsuit can take proactive steps to prevent frivolous litigation and the harm it may do a company. Seeking legal guidance proactively can be very helpful in this regard.