Business disputes can interrupt your daily operations, strain important relationships and affect your bottom line. You might have a disagreement with a vendor, business partner, shareholder, employee, customer or someone who has not paid an invoice. The best way to respond often depends on the facts, the risks and what you hope to achieve. In many cases, you may have several ways to resolve a dispute before going to court.
1. Review your contracts first
Your contract could explain what each side agreed to do and what should happen if a problem comes up. It may include payment terms, deadlines or steps for resolving a dispute. Looking at the contract early could help you decide what options may work best.
2. Try to resolve the issue through negotiation
Talking with the other party may solve the problem without a lengthy legal process. An open discussion could help both sides find a solution that works for everyone. If you want to keep doing business together, negotiation may help protect that relationship.
3. Send a demand letter
A demand letter explains the problem, states what you believe should happen and asks the other party to respond. In some cases, this step encourages a settlement before the dispute becomes more expensive. It also creates a written record of your efforts to resolve the issue.
4. Consider mediation
Mediation brings both sides together with a neutral person who helps guide the conversation. The mediator does not decide who wins. Instead, the goal is to help everyone reach an agreement that they can accept.
5. Find out if arbitration applies
Some business contracts require disputes to go to arbitration instead of court. In California, the California Arbitration Act sets out rules for many arbitration agreements. Checking your contract could help you learn whether arbitration applies to your situation.
6. Decide if going to court makes sense
Court may become the right option if other efforts do not solve the dispute or if the issues involve a large amount of money. Before making that decision, you could think about:
- What contracts, emails, invoice and other records you have
- What time, cost and effect on your business the process may involve
- Whether you hope to continue working with the other party in the future
Keeping your records organized may support your position no matter which option you choose.
Take steps before the dispute grows
Every business dispute is different. Before choosing a path, you may benefit from reviewing your contracts, saving important records and thinking about the short and long term effects of each option. Speaking with a lawyer before the dispute grows could help you protect your business and make informed decisions based on your situation.