Before a Business Dispute Escalates: Five Steps Indiana Business Owners Should Take

By: Brittany Munn

Business relationships do not always go according to plan. A customer may refuse to pay an invoice. A vendor may fail to deliver what was promised. A contractor may fall behind schedule. A business partner may interpret an agreement differently than a consumer does. What begins as a relatively manageable disagreement can quickly develop into a significant contract dispute. When that happens, the decisions a business owner makes early in the process can have a substantial impact on how the dispute ultimately unfolds.

Before terminating an agreement, withholding payment, sending a strongly worded email, or filing a lawsuit, Indiana business owners should consider taking several steps to protect both their legal position and their broader business interests.

1. Start With the Written Agreement

One of the first questions in a business dispute is often straightforward: What does the contract actually say?

Before deciding how to respond to an alleged breach, carefully review the written agreement and any amendments, addenda, proposals, purchase orders, or other documents that may form part of the parties' agreement.

Important provisions may address:

·      The obligations of each party;

·      Payment amounts and deadlines;

·      Performance standards or specifications;

·      Deadlines for completing the work;

·      Procedures for providing notice of a breach;

·      Opportunities to cure or correct a default;

·      Termination rights;

·      Attorney-fee provisions;

·      Dispute-resolution requirements; and

·      Governing law or where a lawsuit must be filed.

A contract may require a party to provide written notice and an opportunity to cure before taking additional action. It may also require mediation, arbitration, or another dispute-resolution process before litigation. Taking action without first understanding these provisions can create additional problems. For example, terminating a contract prematurely or refusing to make a required payment could potentially expose the business to a breach-of-contract claim of its own.

2. Preserve the Evidence

Business disputes are often decided by documents created long before anyone contemplated litigation. Emails, text messages, invoices, proposals, contracts, photographs, payment records, project schedules, change orders, delivery records, and internal business records may all become important evidence.

Once a dispute begins to develop, business owners should preserve potentially relevant information rather than deleting messages, cleaning out files, or relying on employees to remember what happened months later.

Consider preserving:

·      The original contract and all amendments;

·      Emails and text messages between the parties;

·      Invoices and payment records;

·      Proposals, estimates, and purchase orders;

·      Photographs and videos;

·      Records showing whether and when work was performed;

·      Delivery and shipping records;

·      Complaints or notices regarding deficient performance; and

·      Notes or internal records documenting important events.

It can also be helpful to create a timeline while the events are still fresh. Identifying when the agreement was made, what each party promised, what was performed, when problems arose, and how the parties responded can make it significantly easier to evaluate the dispute later.

3. Communicate Strategically Once a Dispute Arises

Once a disagreement develops, communications between the parties can become an important part of the dispute itself. Emails, text messages, letters, and other written communications may later be used to establish what each party understood, what concerns were raised, whether an opportunity to correct the problem was provided, and how each side responded. For that reason, business owners should be thoughtful about how they communicate once a potential contract dispute arises.

Communications should clearly identify the issue and, when appropriate, explain what the business expects the other party to do to resolve it. At the same time, business owners should avoid making unnecessary admissions, agreeing to new terms without understanding their effect, or sending communications that could undermine the business's position later. This becomes particularly important when communicating about missed payments, deficient performance, contract deadlines, demands to cure a breach, or possible termination of the agreement.

Before sending a formal demand, notice of breach, or termination notice, contact an attorney to consider whether the contract requires particular language, a specific method of delivery, or a certain amount of time for the other party to respond or cure the alleged breach. When the stakes are significant, having an attorney review or prepare that communication can help protect the business's position while keeping the focus on resolving the dispute.

4. Decide What Outcome Actually Makes Sense for the Business

Winning a legal argument and achieving a good business result are not always the same thing. Before deciding how aggressively to pursue a dispute, identify what your business actually needs. Is the primary goal to recover unpaid money? Do you want the other party to complete its contractual obligations? Would you prefer to terminate the relationship and move forward with someone else? Is preserving an ongoing business relationship important? Would a negotiated resolution allow the business to avoid months of uncertainty and legal expense?

Understanding the desired outcome helps determine the appropriate strategy. For example, a business that wants to preserve a valuable commercial relationship may approach negotiations differently from a business that simply wants to terminate the relationship and recover its losses. The legal analysis matters, but so do the practical realities of running a business.

5. Evaluate Negotiation, Mediation, and Litigation

Not every contract dispute needs to become a lawsuit. Depending on the circumstances, a business dispute may be resolved through direct negotiation between the parties or their attorneys. In other cases, mediation can provide an opportunity for both sides to negotiate with the assistance of a neutral third party. Litigation may become necessary when the parties cannot reach an agreement, significant money is at stake, immediate court intervention is necessary, or the other party simply refuses to address the issue.

Each option involves different considerations, including cost, timing, confidentiality, leverage, and the likelihood of actually recovering what the business is owed. An attorney can help evaluate not only whether the business has a viable legal claim or defense, but also which approach makes the most sense given the amount at issue and the business's objectives.

Before You Terminate an Agreement or Withhold Payment, Consider Getting Legal Advice

Two of the most consequential decisions in a contract dispute are often whether to stop performing and whether to stop paying. Those decisions should not be made lightly. A party may have legitimate grounds to terminate an agreement or withhold payment when the other side has materially failed to perform. But the contract and the surrounding circumstances matter. Notice requirements, cure provisions, payment terms, and the nature of the alleged breach can all affect the analysis.

Taking action too quickly can potentially turn a business with a strong claim into a business facing competing claims. Consulting with an attorney early does not necessarily mean filing a lawsuit. In many cases, early legal advice can help a business owner understand the contract, assess potential risks, preserve leverage, and determine whether the dispute can be resolved before litigation becomes necessary.

Address the Problem Before It Becomes a Bigger One

Business disputes are often easier to address when the parties act early. Reviewing the agreement, preserving evidence, communicating carefully, identifying the desired outcome, and evaluating available resolution options can put a business in a stronger position, whether the dispute ultimately ends through negotiation, mediation, or litigation.

If your Indiana business is facing a contract dispute, payment dispute, or other commercial disagreement, Eques Law Group can help you evaluate your options and develop a strategy focused on both your legal rights and your business objectives.

To schedule a consultation, call 1-844-MY-EQUES or visit www.eques.law.