Perhaps the most challenging aspect of running your business is being forced to engage in Civil Litigation, especially when your business is not prepared from a legal compliance standpoint and is not financially capable of defending itself.
Therefore, whether you’re a small business owner or managing a larger enterprise, it’s important to understand what mistakes most commonly give rise business litigation and how to prevent them.
Common Business Litigation Issues in Victoria
1- Contract Disputes
Contracts are the legal backbone of most business relationships. They are often the final point of governance to try to resolve disputes that arise in the course of business, before an involved party decides to issue proceedings.
Therefore, it is important a contract is clear, direct and contains no ambiguities. Where a contract provides a direct answer to the dispute in concern, it will be less feasible for an involved party to issue proceedings or for proceedings to be dismissed rather early, thereby sparing your business the legal overheads it could have suffered.
The more vague the contract, the more difficult it will be to enforce.
Prevention: To minimize the risk of contract disputes taking place, ensure all contracts are drafted or reviewed by a lawyer before signing.
2- Employment Disputes
Disputes between employers and employees commonly arise over unfair dismissal, discrimination, harassment, or unpaid wages.
Small businesses are particularly vulnerable as they may not have robust HR policies in place to minimise the risks to the business.
Prevention: Engage a commercial lawyer to review employment contracts, workplace policies, and compliance with employment law regulations.
Early intervention when employment disputes arise is critical.
Planning to dismiss an employee? Get the appropriate advice before dismissal, or immediately after if necessary, to ensure your company does not enter an employment law dispute where it may be ordered to compensate the dismissed employee. Paranoid about a current employee trying to steal your customers? Get the appropriate advice or documents drafted to ensure your employee will not be able to do so.
3- Intellectual Property (IP) Infringement
Businesses rely heavily on their intellectual property to continue successfully trading against their competitors. Examples of intellectual property include unique products, company logo, or unique ideas. Therefore, unauthorized use of your business’s trademark or copyright is a serious threat and often needs addressing, and therefore can result in costly litigation.
Conversely, businesses may unknowingly infringe on the IP of others, leading to legal challenges.
Prevention: Protect your business by ensuring all intellectual property is properly registered and secured with the help of a business lawyer.
Conduct regular checks to ensure that your business is not unintentionally infringing on another party’s IP rights. In the event of a dispute, seek prompt legal advice to negotiate a resolution.
4- Partnership Disputes
When businesses are co-owned by partners, disputes can arise over decision-making, profit sharing, or the direction of the business. These disagreements can be particularly damaging if not addressed early and can lead to the dissolution of the business.
Prevention: Ensure that a partnership agreement is in place and reviewed by a commercial lawyer.
The agreement should outline each partner’s responsibilities, financial contributions, profit distribution, and the process for resolving disputes. Periodic reviews and clear communication between partners can help maintain a healthy working relationship.
5- Debt Recovery and Unpaid Invoices
Many businesses face cash flow problems due to unpaid invoices or customers defaulting on payments. When debts accumulate, it can severely impact the financial health of the business, and litigation becomes a last resort.
Prevention: Implement a clear and transparent credit control policy that outlines payment terms and conditions.
Regular follow-ups and reminders to clients can prevent overdue invoices from escalating into disputes. If payment issues persist, a business lawyer near me can assist in issuing formal demands and negotiating settlements before escalating the matter to court.
If you’re a business owner in Melbourne and want to learn more about preventing common litigation issues, book a consultation with Tohme Lawyers for expert legal advice tailored to your needs.