Most Common Types of Business Disputes
In the business world, disputes can arise over numerous issues. Some are internal, while others are between the organization and outside parties. Even the smoothest-running businesses have disputes, and most are minor and able to be resolved between the parties. There are times, however, when a resolution cannot be reached, and a legal remedy may be required.
There are several conflicts that frequently arise within and between organizations. Here are five of the most common:
This encompasses a wide range of disputes within an organization. Conflicts could be between two co-workers, between one group of co-workers and another group, between an employee and a supervisor, and many others. Employment disputes are often around issues such as harassment, discrimination, and wrongful termination. They may also pertain to non-disclosure agreements (NDAs) and non-compete clauses in an employee’s contract.
A business partnership is not unlike a marriage. In the beginning, everything looks great and the partners are optimistic about the future. As time goes on and the business runs into challenges, partners often do not see eye to eye on the best way to resolve them. One of the reasons disputes often arise among business partners is due to lack of formal agreements and more loosely defined roles. Very often, the roles of the partners overlap, creating conflicts that sometimes can threaten the stability and future viability of the business.
Disagreements can arise among shareholders for a number of reasons. Because there are typically multiple shareholders who all have a financial stake in the organization, these types of disputes can become very tense and highly complicated. Some of the typical causes of shareholder disputes include breach of fiduciary duty, disputes over business valuations, disputes over buy-sell agreements, disputes over distribution, and disagreements over the direction of the organization.
Most agreements in the corporate world are governed by written contracts, and one of the most common types of business disputes is an alleged breach of contract. Breaches of contract occur when one party fails to perform under the terms and conditions of the agreement. Examples may include failing to meet deadlines, failure to pay for goods and/or services, providing defective products and/or poor service quality, fraud/misrepresentation, and many others. Contracts are often vaguely worded and subjective in manner, making it difficult to determine if one or more parties is in violation of its terms and conditions.
This type of dispute can be related to a breach of contract when the actions of an outside third-party cause one or more parties to violate the contract, causing economic injury. Another type of tortious interference can occur when an outside party intentionally damages a business relationship, again causing economic injury.
Common Ways Disputes are Resolved
When there is a dispute in the corporate world that the parties are unable to settle on their own, there are three primary ways to resolve them:
• Negotiation: The first approach to resolving business disputes is usually to try to negotiate a settlement that both parties can live with. Negotiation is often preferable to more formal and expensive dispute resolution approaches, because it is usually done between the parties and their legal counsel, and without the involvement of a third-party facilitator.
• Arbitration/Mediation: If negotiation fails, the next step is often to attempt a settlement through arbitration or mediation. In fact, many contracts have either of these methods listed for resolving disputes. Arbitration and mediation are similar, but there are some key differences. Both are facilitated by a neutral third-party. With mediation and non-binding arbitration, however, the facilitator has no authority to impose a settlement on the participants. With binding arbitration, the arbiter makes the final determination.
• Litigation: If other methods fail, parties to a dispute may have no other choice than to pursue litigation. Taking a dispute to court can be a costly, complicated, and protracted process. Before going this route, be sure to consult a seasoned attorney who understands the complexities of these types of cases.
Speak with an Experienced Kentucky Business Disputes Lawyer
There are countless reasons why business disputes arise. In many cases, these disputes can be mitigated from the outset with clearly-drafted and well-reviewed contracts. When they do occur, and they cannot be resolved between the parties, it is important to have strong legal counsel in your corner to advise you of your legal options and the best course of action to obtain appropriate relief.
At the law offices of John H. Ruby & Associates, we have in-depth experience with all areas of business law, including commercial and business disputes. Our attorneys can assist with disputes and any other type of business-related legal matter. To schedule an initial consultation, call us today at 502-895-2626 or send us a secure and confidential message through our web contact form. You may also visit our Louisville office in person.