Viable businesses are going concerns engaged in multiple business arenas. These arenas can involve traditional commercial activity (e.g., selling goods or performing services, etc.) or perhaps government relations or matters of intellectual property. Nevertheless, the law of numbers says that if you operate a viable business, you will end up in some sort of business dispute. That dispute could be internal (e.g., with your business partner) or external (e.g., with a commercial vendor). In this guide, we discuss the various types of business disputes and then how you resolve a business dispute.
Source of Business Disputes
At the outset, we are not focused on business dispute resolution between a business and a consumer. Those disputes raise a whole host of independent issues not within the scope of this guide. Rather, we are discussing partner to partner (i.e., internal) or business to business (i.e., external) business dispute resolution. Internal business disputes usually involve a disagreement springing from:
- Vision differences—your business partner disagrees on the future of the business;
- Loss of interest—your business partner is not pulling their weight or is disengaged;
- Violating contracts—your business partner is breaching the terms of an agreement (e.g., employment, confidentiality, or non-compete agreement, or the governing documents of the business);
- Diverting business opportunities—your business partner is giving business to another person;
- Self-dealing—your business partner taking opportunities for themselves; or
- Disparagement/Interference—your business partner is speaking poorly of the business or disrupting it.
The above represents the most common circumstances of internal business disputes. On the other hand, external business disputes usually arise from:
- Breach of contract (e.g., scope of work, quality of work, payment, etc.);
- Breach of warranty —violation of an express or implied warranty underlying a transaction; or
- Liability to third parties—it may be that a person was injured in a situation where you or another business may be liable.
The above is but a sampling of the various sources of conflict from both internal and external business matters. However, now that you have a clear idea of what creates a business dispute, how do you resolve a business dispute and, most importantly, where do you start?
After a Dispute Arises
The most important action you can take after a business dispute arises is to understand your legal footing. Without a clear view of the “legal landscape,” you may lack critical information when making decisions going forward. To that end, we encourage you to consult with an experienced business legal matters attorney in Iowa. Because business law involves a wide range of topics, all of which are interrelated, a business legal matters lawyer can help you map the legal landscape and identify pathways forward. Thereafter, you can then better articulate your goal in the dispute, such as getting paid, requiring performance, instigating a buy-out, etc. A good business legal matters attorney can explain each of these potential goals to you.
Methods to Solve Business Disputes
Now that you have an idea of where you want to end up in resolving your business dispute we have outlined below several business dispute resolution options. Further, we have organized them from the least formal to the most formal, and have pointed out some pros and cons to each.
If a degree of cooperation still exists between you and the other side, you may consider negotiating a settlement of the dispute. To that end, we suggest you retain a third party to represent you. Further, delegating your interest to a third party usually helps when tensions are elevated. Negotiation is good because it keeps costs down, can be relatively quick, and can result in a mutually agreeable outcome. On the other hand, a negotiated settlement is ultimately just another contract that, if breached, may bring you right back to square one.
Mediation involves retaining a mutually agreed third party who will then use their skills to guide you and the other side to a settlement. When opting for mediation, we suggest you select a specialist who is familiar with the specifics of your business or industry. If the mediator is unfamiliar with your field of business, they may ultimately hurt the mediation efforts. Mediation is usually cost-effective and swift. It also allows both parties to maintain some control over the process (i.e., you could simply stop the mediation process). Finally, mediation, like negotiation, requires consensus by both parties, which bolsters the strength of any mediated agreement.
Arbitration usually results from a contract term and may be the exclusive remedy available to you and the other side. In the alternative, it may be that your relationship is so toxic that negotiation or mediation will not function and you need a more formal process. Arbitration can be that process. It involves a third-party arbitrator who is in effect a private judge. Further, the arbitrator is frequently a specialist in the subject of the dispute and therefore can understand the complexities of the matter. The benefits of arbitration are lower costs, a quicker time frame, and a decision that is almost always final.
This is the traditional choice to resolve commercial disputes. Often litigation is the only viable option due to the breakdown of the relationship between you and the other side. Litigation is also attractive because it allows for a full presentation of your case, requires adherence to rules of evidence, and is enforced by a court judgment. In addition, if you lose, you still have appeal rights. On the negative side, litigation is slow, costly, and often involves decision-makers (i.e., the judge or jury) who are not specialists in your business or industry.
303 Legal, P.C. Can Show You the Way
At 303 Legal, P.C. our business legal matters lawyers know how to resolve business disputes without litigation. From filing a straightforward complaint to interviewing and vetting potential arbitrators, 303 Legal, P.C. can guide you to the best business dispute resolution for your situation. We are located in Cedar Rapids but serve clients throughout eastern Iowa. Contact us today to see how we can help keep your business on track.