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Sometimes I feel like a mechanic at the car repair
shop staring out at the smoldering engine and wondering why my unhappy
customer simply neglected to change the oil, the transmission fluid or
have a tune-up.
Businesses, like automobiles, need routine maintenance
in order to prevent major problems. I am sure that you will agree that
the average tune-up, oil change and other areas of routine maintenance
are less costly than the transmission overhaul or replacement. There
are certain things that you can do in your business to avoid the
likelihood of litigation and its attendant cost.
Here are a few of them:
Put it in writing. Face it, the age of the handshake
is over. How many clients come in to my law office with a dispute or a
problem and tell me I trusted him, he was my friend or we never had a
problem before.
This is the old story line and it repeats itself in my
office and in law offices throughout the country on a daily basis.
Trust no one. Business is not about friendship. Confirm your
agreements in writing. If it is simple and straightforward, do it
yourself. If it is not, consult your attorney to put the agreement in
writing.
Here is a list of some of the things that should be
covered by a written agreement in most circumstances: (1) shareholder
agreements in closely held corporations; (2) purchase and sale
agreements for business assets; (3) agreements to sell real property;
(4) retainer agreements for the performance of professional services
(i.e., accountants, lawyers, technical support and consultants), and
(5) invoices to reflect the sale and delivery of merchandise.
These are a mere sampling of the types of agreements
to put in writing. While these agreements may not prevent litigation,
it might help you win litigation if that becomes necessary.
Paper the employee personnel file. All businesses have
that employee about whom they are not sure. It is that employee who
pushes the envelope, who comes in late, takes long lunch breaks, fails
to perform or is otherwise detrimental to the operation of the office.
You know who I am talking about.
This is the type of employee who will ultimately, when
terminated, claim that you have “discriminated” against him or
her. This is a popular method of seeking revenge after an employee is
terminated. In these matters, employees know that the litigation of an
employment discrimination claim can be a time consuming and costly
endeavor for the employer.
However, you can fight back if you have the right
tools. Have your human resources director, or other personnel employed
in that position, get used to papering the file. Keep attendance
records. Prepare memos whenever an employee is insubordinate or
otherwise not performing.
It is important to prepare these memos at the time
that it is occurring, not after an employee is prepared to file a
claim. These are the documents which will ultimately dissuade another
lawyer from bringing a claim against your company when it becomes
clear that performance, rather than discrimination, was the motive for
termination.
Be candid with creditors. My firm has represented many
creditors over the years, people who are owed money in connection with
business transactions. We have also represented companies who owe
money to other businesses or individuals.
In that vein, there is nothing that a creditor likes
less than silence. A failure to communicate on a regular basis with a
creditor to whom you owe money will likely result in a lawsuit.
Creditors litigate only to recover money when all else fails.
When you fail to communicate with a creditor, you
insure that all else has failed and you encourage that creditor to sue
you. Creditors are interested in only the bottom line and when they
will get paid. Most creditors will accept a payment plan or a promise
to pay in the future in exchange for avoiding litigation. Do not be
silent.
Be careful what you say to your customers. Customers
will remember what you said about your product or service. They will
remember what your salesman said to them. They will hold it against
you if anything goes wrong. Be careful not to overpromise or to make
representations about your product or service that you cannot deliver
upon.
Sales people are famous for this. The job of the
salesman is to make the sale, not to protect your company.
Accordingly, instruct them as to what they can or cannot say in
connection with making a sale.
There is law in Florida that protects consumers from
deceptive and unfair trade practices. The law provides for the
consumer to recover his or her attorney’s fees if they are
successful. Accordingly, your sales staff should be trained to promise
your customers quality products and services but not things upon which
they cannot deliver. This is obviously a fine line and must be
analyzed on a case-by-case basis.
Understand the legal environment in which your
industry operates. Many industries are regulated by laws specifically
targeted towards them.
For example, if you are an automobile dealership and
arrange financing for consumers, your conduct is governed by the
Federal Truth in Lending Act. If you own a mortgage brokerage
business, your conduct is governed by certain sections of the Florida
statutes that regulate what types of loans you may originate. If you
sell products, your conduct is governed by the Uniform Commercial
Code.
It is not enough to be fair and honest in this world.
You must understand the laws that govern your conduct. I cannot
emphasize how many times clients have come to my office and admitted
that they were ignorant of the laws governing their business which,
when not complied with, result in a lawsuit.
Read the contract before you sign it. I cannot tell
you how many people sign anything that they are told to without
reading it. It is astonishing. Later, when an issue arises, they often
are astounded to find out what they agreed to.
Many people believe that if they do not read contracts
before they sign them they are not bound. That is wrong. Unless you
are deceived about a contract, you will be held to it. You do not have
to sign everything that is placed in front of you. Instead, you may
read the contract — no one may prevent you from reading it. You may
change the terms of the contract (that is what pens are for). You may
even send it to your lawyer for review. This will help keep you out of
trouble.
If you are the buyer, get it in writing. Consumers
often fall victim to the promises of fast talking sales people. Sales
people make promises, but they are often short-term employees. When
you go back to the store to call the store on its promise, you often
will find that the salesman is “no longer with the company.”
Then what will happen to the oral promise that the
salesman made to you? Most often, it will be ignored; it will be
disclaimed. The store or vender will pretend not to know you. Instead,
what will likely happen is that someone at some point will explain to
you that the salesman was terminated because he or she said something
that they should not have. If you force the salesman to put the claim
in writing, on the company stationary, letterhead or invoice, it will
be the company’s problem when you raise this issue later. If you do
not, it will be your problem.
These are just a sampling of items to watch out for in
order to avoid being sued or the need to sue someone. While these tips
are not a guarantee of avoiding litigation, if followed they can
certainly help. Moreover, if you adhere to the above rules, you will
be more likely to prevail in litigation if it becomes inevitable.
Roger Slade is a partner in the law firm of Pathman,
Lewis and specializes in commercial litigation. He can be reached by
telephone at 305 379-2425 or by e-mail at <rslade@pathmanlewis.com>.
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