Enforcement of Business Contracts
Although businesses do not always memorialize their agreements with written contracts, unless they fall within the few exceptions to the rule, oral contracts are enforceable. The main drawback, as most business owners discover, is that after a dispute arises, people have different recollections of what the deal was. The disagreement over what the agreement was can make lawsuits more difficult, but it may be the only rational response if an impasse prevents a reasonable settlement.
Drafting contracts for a one-time or an ongoing relationship can be done by the parties, but is often best left to a legal professional who has seen a variety of disputes, and can help the client guard against the risks of breach. For example, a winning party cannot force the loser to pay its attorney’s fees in court unless there is a contractual (or a statutory) provision to that effect. Similarly, parties cannot be required to resolve their disputes by arbitration unless both sides have consented. The best time to get consent to either an attorney’s fee shift or arbitration is before a dispute arises.
Clientelevision has prepared a number of short guides to commonly asked business law questions.
Small Business Troubles – Insiders and Outsiders
Small business disputes usually fall in one of two categories: problems with the insider and problems with the outsider.
Internal dissension may take the form of an embezzling employee, a sexual harasser wreaking havoc in the workplace, or even the two founders of the business breaking up. These issues can destroy a business or at least make it very difficult to get the core business done.
Take for example the trusted bookkeeper who siphons out money by diverting checks or creating phony invoices. This can go on for years when only one person is in charge of every aspect of bookkeeping and banking. Naturally this is not what the hardworking business owners deserve.
More difficult cases are where the owners, or their heirs who take over the business, have bitter disagreements. Sometimes there is no resolution that does not involve a breakup. But breakups can be expensive and destructive, or they can be collegial and ultimately constructive.
The problems with the outsiders involve such headaches as nonpaying customers, nonperforming vendors, and competitors violating laws of unfair competition. If these can’t be worked out by rational discussions and negotiations, court intervention may be necessary.