by Andrew Flake
You may have heard the proverb along that the best time to plant a tree “is 20 years ago.” It makes us pause and consider that in so many instances, we’re taking small actions today with benefits we may not see immediately, or that we may not see ourselves at all. I thought about it yesterday, during a webinar and conversation my friend Karen Mills hosted.
The topic was Practical Pointers in Business Litigation, but so much of what I wanted to share had to do with the actions we can take well before any dispute arises — the trees we’re planting now, in other words, will be giving us shade and relief from conflicts we don’t even know about, and if they occur at all, that will be far in the future.
A great place for a business to start planting is the contract stage, both in drafting its own standard contracts and in negotiating those it receives from business partners. In our webinar, Karen and I discussed the issues that I see litigated time and again in commercial disputes, and where they could have avoided. Here’s a summary of some of them.
- Give Attention to Non-Business Terms, Considering Worst-Case Scenarios: While business terms like pricing and delivery time are crucial, and often the focus of negotiation, it’s equally important to address risk-related language. Provisions that a businessperson might tend to overlook, or to write off as “boilerplate” or the standard “fine print,” can be some of the terms most central to protecting against litigation risk. If nothing else, have company counsel spend the time to review that language and identify any red-flags. Among them are
- The Merger Clause: The contract should be the sole source of promises and commitments. Sometimes referred to an “entire agreement” or “integration clause,” the merger clause ensures that the contract itself serves as the exclusive document governing the parties’ obligations. When well-drafted, it prevents any additional promises or commitments from being enforceable, offering clarity and avoiding potential disputes arising from extraneous agreements.
- Limitation of Warranties and Remedies: Clearly defining the scope of warranties and limitations can protect your business from unwarranted liabilities. By setting reasonable expectations and clearly outlining the extent of your warranties, you can limit potential claims and associated costs. This would include provisions that specify and limit remedies in the event of breach, as well as those that cap damages, or tie them in to some specific and limited metric, like revenue actually paid or received.
- Consider Dispute Resolution Clauses, Including “Staged Resolution“: Consider incorporating a staged resolution approach, which involves informal resolution, executive conferral, possible mediation, and like non-binding efforts, prior to formal proceedings such as litigation or arbitration. Using an escalated or “step-by-step” process can provide important safety-valves, opportunities for amicable resolution before more adversarial proceedings become necessary. Certainly, and this will be a topic for another blog, an arbitration clause of the sort found on the American Arbitration Association’s website, deserves strong consideration as more streamlined and faster alternative to getting business disputes decided.
- Prevailing Party Attorney’s Fee Provision: At least consider the relative merits of a provision that awards attorney’s fees to the prevailing party in a dispute. If properly drafted, because it places the burden of legal costs on the losing party, such a clause can deter parties from asserting weaker claims, and promote discussion about fair and reasonable resolution attempts.
Wondering whether you’ve missed the planting season? Not at all. That proverb I mentioned goes further — yes, the best time to plant a tree is twenty years ago, but “the second best time is now.”‘