The best way to resolve a dispute is to AVOID disputes in the first place! Seriously. Think about it.
Lawyers spend as much or more time resolving disputes than they do preventing them. The cynic in me thinks that lawyers prefer lawsuits, because lawsuits are time consuming and generate more fees for lawyers. When a client gets sued, the client has few options- settle on unfavorable terms, bankruptcy or fight the lawsuit. There are costs associated with each of these three options.
There is a better way. . . well drafted and implemented contracts and legal forms.
Sadly, many clients do not want to pay a lawyer for the time it actually takes to create a good contract. Yet, a good contract is like insurance, in that sense that you can pass on liabilities and risks to another person through contracts. Actually, insurance is a contract between you and the insurer. A good B2B or B2C contract transfers risks from your business to another business or your customer, much like insurance.
Best of all, contracts set expectations. Everyone signing a good contract knows what the result of a lawsuit will likely be, resulting in fewer reasons to file lawsuits. Think about this- Why would you defend a lawsuit, if you knew you were going to lose in court? If your contract tells you that you’re going to lose, then settle and write a better contract next time.
The difficult lawsuits are those where (1) there is a bad contract in place or (2) the facts are uncertain. Those are the cases that should go to court.
However, before you run to the courthouse, consider four other ways to resolve a dispute:
1. Try it again. Reformulate the relationship by drafting a new contract to replace the one you signed. Presumably, you and your “opponent” wanted to do business together when you signed the first contract. If the contract form you signed was poorly written, consider efforts to save the relationship and sign the contract you wanted from the beginning. If all trust is lost, then this option won’t work.
2. Try talking. Try settlement negotiations with or without your lawyers present. It is amazing how easy it is to resolve disputes over a cup or coffee or a beer. Try it.
3. Mediation. This is a process available before or after a lawsuit is filed. A mediator is hired to assist you in negotiating a settlement. The process depends on the willingness of the parties to settle. Note that the rules governing mediation differ depending on whether mediation is done before or after a lawsuit is filed.
4. Arbitration. Essentially, you hire a private judge. The advantage of arbitration is that it is faster and cheaper than going to court.
In a future blog, I’ll talk about these four options in more detail. There is an article on arbitration clauses in contracts on my law firm’s website- www.indiana-attorneys.com.