January 8, 2018

10 things I know about ... Causing & preventing business litigation

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AiVi Nguyen is a partner at Worcester law firm Bowditch & Dewey. Reach her at anguyen@bowditch.com

10) Relying on a handshake.

I cannot stress enough: Every single contractual term must be in writing. This includes provisions for all possible issues like responsibilities, termination, one of you drops dead, the building burns down.

9) Signing something without understanding it fully.

Oftentimes, people are so excited about a deal they will sign documents without fully digesting the terms, agreeing to clauses much too burdensome.

8) Misrepresentation.

Business lawsuits almost always include a claim for misrepresentation. To be liable, a party had to have made a material misstatement of fact. In other words, someone lied.

7) Lack of a business plan.

Many lawsuits happen because a party simply did not cross all of its t's and dot all of its i's. Having a thorough business plan forces parties to think things through.

6) Ideological differences.

Partners often are not on the same page about where they see the business in five, 10, 20 years. Have the discussion early.

5) Greed.

This is the primary reason business relationships go south. Combat the temptation by making sure mechanisms oversee the money and punish a partner caught with their hand in the cookie jar.

4) Uneven contributions.

Delegate important duties to each partner and hold each other accountable.

3) Failure to communicate.

Warring business partners always accuse one another of making decisions without consulting the other. Establish a decision-making process to ensure each stakeholder is kept apprised.

2) Shoddy bookkeeping.

Acting in good faith and with integrity is meaningless if you cannot prove it. Detailed recordkeeping prevents allegations of wrongdoing.

1) A lawyer was not involved.

Every single litigation I have ever seen could have been prevented if there was competent legal oversight involved from the beginning. Call your lawyer. The attorneys' fees you think you are saving by cutting out the lawyer are a fraction of what it will cost you to get through a lawsuit.

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