By: Justin C. Carlin
As a business litigator who depends on business litigation cases to sustain my business law practice, it may seem strange that I would write a blog post about how to avoid litigation. But my goal as a business attorney is to provide valuable services to people, so I’ve always made it a practice to assist my clients with avoiding litigation, even though I am a litigator. Here below are my top five strategies for avoiding business litigation in South Florida:
- Reduce all agreements to writing and have them reviewed by a competent business attorney before signing the agreement. Nothing fuels business litigation more than mere innuendos and oral discussions that form the basis for a business transaction. Moreover, poorly drafted agreements, or a party’s lack of awareness of the law when entering into a business agreement, can create a basis to argue either that a written agreement means something other than what the parties intended or is unenforceable. Attorneys at our firm regularly review business contracts for our clients to determine whether the contracts are fair and enforceable. If you need a Florida business attorney to review a business or real estate contract for you, please call us before signing the agreement. It doesn’t take long to have a contract reviewed and, when compared to the high cost of business litigation, is not very costly.
- Don’t lend money without obtaining adequate security. Business litigation often ensues when a borrower encounters financial difficulty and prioritizes between his or its creditors. The creditors whose loan is secured by collateral (such as a house or a car) will almost always get paid before any unsecured creditors. That’s because, if there’s a default on the loan, the secured creditor can seek to foreclose on the collateral in satisfaction of the debt obligation. Secured creditors are also afforded greater protection in bankruptcy and other insolvency proceedings.
- Get payment for services in advance. Somewhat related to making sure that a loan is collateralized, a service provider should, to the extent possible, require that its customers provide payment for its services in advance. Once the services are rendered, the customer loses his or its greatest incentive to pay—the desire to receive the services. If the customer is unethical, the customer may intentionally fail to pay the service provider after he has received the benefit of his bargain.
- Require that deposit money be placed into escrow. Before having to retain me, many of my clients have tendered a deposit for goods or real estate, but failed to require that the deposit be placed into escrow with an escrow agent. When money is not placed into escrow, the money tendered can be used for any purpose and, if the money is lost, may never be recovered.
- Don’t get sloppy in your business transactions. When you’re used to dealing with someone on a regular basis, it’s easy to get comfortable and let your guard down. However, smart business people make sure that they’re always protected. For example, if you’re a subcontractor dealing with a general contractor who has paid you for three years for all of your projects, don’t fail to send the required Notice to Owner, which will allow you to perfect your lien rights if the general contractor fails to pay you. As another example, if you’re a distributor buying goods from a supplier, don’t pay the purchase price to the supplier in advance without requiring that the sum paid be placed into escrow, even though the supplier may have (dozens of times) previously delivered on those terms.
These are five ways to guard yourself from business litigation—a long, often uncertain, and always costly process. If, despite following my admonitions, you are still in need of a South Florida business attorney to handle a business litigation matter (in Palm Beach County, Broward County, or Miami-Dade County), then please call our law firm in Fort Lauderdale at 954-440-0901 to schedule a consultation with a Broward County business lawyer.