How to Protect Your Small Business From Potential Litigation

One of the most common questions business lawyers get – especially from new business owners, but really from many business clients – is “What can I do to make sure I don’t get sued?”

The answer, of course, is “Nothing.”

Actually, that’s not the answer. Because sometimes doing nothing will spark a lawsuit.

The better answer is that they are asking the wrong question. The right question is “What can we do to minimize the risk of getting sued or having to sue somebody else?” and “What should we do to give us the best chance of winning if we do end up in court?”

Ok, yes that’s two questions. But these things are complicated and nuanced.

Make Expectations Clear

Many business disputes result from simple confusion – parties to a deal were confused about what the other party expected. You can reduce that risk by taking the time to spell out expectations clearly in writing. That writing doesn’t have to be in fancy legalese. In fact, it shouldn’t be. The best contracts are the ones everybody can understand. Read the agreement and make sure you know what every term means and why it’s in there. If you don’t know, ask the other party to explain what they think it means. If you can’t figure it out, then maybe it shouldn’t be there.

It can feel tedious to carefully draft the language in your purchase contract or partnership agreement. But it’s more tedious, time-consuming, and expensive to go to court to figure out what that weird subparagraph means.

Additional Layers of Protection for Your Business

Your contracts can also incorporate protections from litigation, or ways to minimize the impact of lawsuits on your business. What language is appropriate depends on the circumstances of each deal, but some possibilities include:

  • Setting a limit on how long the parties can wait before starting a lawsuit. Statutes of limitation set those limits in most cases, but parties can agree to a shorter time frame as long as they keep it reasonable.
  • Spelling out what is or isn’t covered by a warranty.
  • Limiting the scope or measure of damages either party can recover from the other.
  • Requiring the losing party in a lawsuit to pay the winner’s legal fees.
  • Requiring the parties to try to resolve any disagreement in mediation before starting a lawsuit.

When Litigation Becomes Necessary

Litigation exists for a reason. Sometimes the parties just can’t resolve a disagreement themselves, and they need a judge or jury to decide who’s right. Even in those situations when litigation is unavoidable, planning ahead will help. If you have good, clear contracts, and if you keep good records showing that you met your obligations, litigation will be easier, less expensive, and maybe even a bit faster. With good evidence, your attorney will be better positioned to assess your case and how strong your position is, and with information can help craft a strategy to pursue a good outcome.


Learn more about the business litigation process in Minneapolis by calling Rubric Legal LLC today at (612) 465-0074 to speak with a trusted business attorney.

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