What Can Happen to Your Business if You Get Sued?

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Getting sued is one of the worst things that can happen to a business. Although not all lawsuits end badly, getting into legal trouble will often have negative effects on a business to some degree. But whatever the case may be, getting sued is never good for business, and it should always be a priority for business owners to avoid lawsuits at all costs.

However, no amount of planning or precaution can erase the risk of lawsuits entirely. And it’s even worse for businesses who don’t prioritize proactive actions against lawsuits. Either way, getting sued can result in one or more of various outcomes.

What can happen to your business if you get sued?

There are many reasons that can cause a business lawsuit. Some of the most common ones include:

  • Breach of contract. If your business does not meet the legal duties as stated in the contract between you and another party, you may be sued for breach of contract.
  • Intellectual property. Infringing intellectual property laws can land you in a lawsuit when the owner of the intellectual property seeks justice for getting their property stolen.
  • Employment laws violations. Employees can sue a business for discrimination, unfair wages, wrongful termination, and other violation of laws that protect their welfare.
  • Injuries and accidents. Individuals who sustain injuries on your business property due to your negligence can sue you for personal injury.

Settlement

A dispute between two parties can be resolved without resorting to litigation. This method is referred to as Alternative Dispute Resolution or ADR.

There are three main types of ADR, namely arbitration, mediation, and negotiation.

  • Arbitration. In this type of dispute resolution, an arbitrator hears both sides of the dispute and then comes up with a decision. The parties can decide if they want the decision to be binding or non-binding.
  • Mediation. A mediator issues a non-binding decision after the parties communicate their sides of the story. This method of ADR is usually less expensive and time-consuming than arbitration.
  • Negotiation. Under negotiation, the parties settle the dispute between themselves (without a third party) until a decision is made. This is also less expensive and time-consuming than arbitration, albeit not being applicable to all kinds of disputes.

Needless to say, alternative dispute resolution is much better than litigation in a lot of different ways. First and most importantly, reaching a settlement with the other party often takes less energy, time, and money to do than resorting to litigation. Moreover, you have the advantage of keeping things as quiet as possible since both parties have the option of adding confidentiality clauses, helping you preserve your image as much as possible.

In any case, ensure that you consult with a reputable business lawyer as you would with an experienced divorce lawyer–you want someone who is experienced and well capable of handling the legal problem you’re faced with, especially with so much at stake.

divorce process

Litigation

Legal disputes can go directly to litigation or otherwise result from a failed alternative dispute resolution. So when you receive a notice of the lawsuit, it is already too late, and the best thing to do now is move forward in a way that will minimize your losses.

The process of litigation begins when one party sues another. When you receive the summons, you are required to respond within a set deadline. After this, the discovery process begins, where both parties gather information and documentation that are relevant to the case.

Motions can be made by both parties to request information or change the venue of the trial, among other requests. As such, setting the final court date can take several weeks or even months, which can be both good and bad. On one hand, you can have more time to gather the information that will help you win the case. But on the other, stretching on the lawsuit can have detrimental effects on your business, especially if it’s a high-tension case.

What are the things at stake?

When your business gets sued, here are the major drawbacks that you can expect:

  • Costs. Legal disputes cost money, time, and energy, more so if you are taken to court by the complainant. For businesses that have limited cash flow as it is, a lawsuit can be potentially catastrophic.
  • Reputation. When a lawsuit goes public, it can cost you the reputation you worked years to build.
  • Relationships. Disputes can destroy relationships between parties. Moreover, the stress of a lawsuit can also affect your personal relationships.
  • Operations. A messy lawsuit can put your business on hold, causing you to lose even more money. In the worst cases, a lawsuit stops your operations altogether.

Business lawsuits, regardless of the severity, are better prevented than dealt with. To avoid legal disputes between your business and another party, be it a client, employee, or vendor, consult with a business lawyer when making important business steps, including contract drafting, incorporation, and hiring.

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