Running a business is never without risks, but the right legal strategies can mean the difference between a challenge and a crisis.
Many of the disputes I have encountered in my 25 years as a commercial litigator could have been avoided by taking a more proactive approach. Whether it is unclear contracts, outdated documentation, or trying to cut costs by skipping professional advice, the consequences of neglecting legal safeguards are far more expensive than the initial investment.
By integrating sound legal practices into your business from the outset, you can save time, money and headaches down the track, mitigating risk and setting your business up for long-term success.
The most common legal risks facing businesses today
One of the most persistent issues I see is businesses repeating past mistakes. Be it failing to properly document agreements, overcapitalising on ventures without adequate legal safeguards, or avoiding the essential step of seeking early legal advice, these missteps can have costly consequences.
Many business owners hesitate to invest in legal advice at the start of a transaction. While they think they are cutting costs upfront, or that it is an unnecessary expense, failing to do this can lead to disputes that cost tens, if not hundreds, of thousands of dollars down the line. Nothing can replace clarity at the commencement of a legally bound relationship.
Another common risk is the lack of robust internal and external documentation. Businesses frequently overlook the importance of having key agreements—such as shareholder agreements or customer contracts—thoroughly reviewed and updated to reflect current laws. This exposes them to disputes and leaves them ill-equipped to handle them.
Finally, many businesses fail to recognise that disputes divert time and energy away from their core operations. Pursuing a matter of principle in court, for example, might feel like the right move, but it often costs more, both financially and operationally, than it’s worth. Time spent on litigation is time not spent on growing your business.
Structure your contracts to minimise risks
Contracts are the foundation of any business . A well-structured contract can safeguard your interests and minimise the risk of disputes. But here’s the catch: you can only structure a contract as well as you can negotiate. Agreements must reflect the realities of your negotiations while ensuring compliance with current laws, including considerations like unfair contract terms.
Consistency is key. Businesses should ensure all agreements, whether with customers, suppliers or stakeholders, are aligned and regularly updated. Implementing “time check” practices, such as scheduling periodic reviews of contracts, can help identify outdated terms or gaps that need addressing. Ambiguity breeds disputes, so above all, ensure every agreement is clear, concise and unambiguous.
Prevent Dispute Before They Start
The best way to manage disputes is to prevent them from escalating into court litigated disputes. In my experience, whilst disputes are inevitably a part of day to day business, they do tend to more frequently “find” businesses which do not maintain communication and have a lack of clear documentation. Written communication is vital. There is no doubt that verbal agreements cause significant legal issues due to misunderstandings and a lack of clarity. Put everything in writing and clearly detail all expectations and obligations.
When disputes do surface, approach them with a problem-solving mindset. Litigation should always be a last resort. Consider alternative dispute resolution methods, like mediation or arbitration, which can resolve conflicts more quickly and cost-effectively than going to court. Seek legal advice early and as soon as possible after the dispute arises: the investment may save you thousands later.
Leverage technology to reduce legal risk
Technology can be a powerful tool in minimising legal risks. For instance, electronic acceptance of terms and conditions can streamline contract formation and reduce disputes over whether parties agreed to specific terms. However, clarity must also be provided as to who is able to accept terms, and at what time a contract has been legally formed.
Automated reminders for key legal obligations ensure contracts are reviewed and updated regularly and you meet all regulatory deadlines. This reduces the risk of outdated or inconsistent documentation and simplifies compliance so you can stay ahead of potential risks.
Similarly, maintaining written records, whether through email correspondence, contract management software or cloud-based storage, ensures your business has a clear trail of evidence to support your position in any dispute.
The true cost of neglecting legal strategies
What happens if you don’t have a comprehensive legal strategy? You lose control. When disputes escalate to court, you surrender the ability to shape the outcome. Decisions are left in the hands of the court, often with results that neither party finds satisfactory.
Businesses that react to, rather than prevent legal disputes, inevitably spend more on legal fees. They also risk a toll on their team’s time and morale. No business thrives under the weight of protracted legal battles.
In the end, prevention is always better than cure. Legal strategies should be seen as an integral part of your business planning, not an afterthought. From robust contracts to effective dispute resolution mechanisms, with the right legal guidance, your business can thrive in even the most challenging landscapes.
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