How to Minimize Lawsuits and Legal Fees

Here are five precautions you can take to maximize your chances of winning legal battles and minimize your chances of being sued, your need to sue others, and the potential legal fees associated with lawsuits.

If you’re like most people, you’re likely to have two opposing viewpoints about the law. Depending on where you stand in any individual legal confrontation, you may find yourself muttering, “There ought to be a law!” or “Laws! Laws! There are too many blasted laws!”

As a business person, you’re likely to have more encounters with the law than the average individual. Sometimes, you may be victimized by suppliers, contractors, or employees. At others, you may come under attack from dissatisfied customers, clients, or government regulatory authorities.

Regardless of the outcome of any legal encounter, the cost of the battle can have devastating effects on your home-based or other small business.

While there is seldom much you can do to stop legal action that has been started against you, the following five precautions can help you maximize your chances of winning legal battles and minimize your chances of being sued, your need to sue others, and the potential legal fees associated with lawsuits.

Maintain adequate personal injury liability insurance

Although a standard homeowner’s insurance policy offers protection against personal injury liability suits, that protection may not cover personal injury to customers, employees, or suppliers of your home business. Ask your insurance agency to make sure you have coverage against such personal injury claims. Many insurance companies now offer riders (additional options) that add this important protection to your home insurance policy for only a very small additional annual fee.

Make sure you get a written contract for work assignments

To be enforceable, an agreement must have all the elements of a contract. While the law does allow many contracts to be oral, it’s recommended that you always have a written contract.

Without a written contract detailing all aspects of an agreement, you leave yourself open to misunderstandings and outright lies. Consider a computer consultant who has agreed to develop a particular application program for a company on an oral agreement. The company and programmer agree verbally that the program should be finished in four months. Without a written contract spelling out specific details, the consultant may plan to deliver the prototype for the program in four months and work out the bugs in the ensuing weeks or months. The company may be expecting the debugged version of the program to be ready in four months. The result? Hard feelings and possibly legal action either by the consultant to collect his fee or the company claiming damages due to the unacceptable delay in delivery of their program.

Know your capabilities and perform all jobs with care

You may also be sued because you have not performed up to a reasonable standard of care (lawyers call this “negligence”). In order to minimize your chance of losing a negligence suit, perform your tasks using an amount of care equal to or above the care normally exercised in your business for performing that task, and, whenever possible, document your actions.

Consider including an “attorney’s fee” provision in contracts

Such a provision will usually allow you to collect your attorney’s fees from the other side if you win. Unfortunately, it also allows the other side to collect their fees if you lose.

Consider purchasing Errors and Omissions Insurance

To further protect yourself against negligence claims, you may want to buy errors and omissions (E & O) insurance. Such insurance will normally pay the attorney’s fees for your defense as well as any damages assessed against you up to the limit of your policy.

Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.