Running a business includes various types of risk. One of those being the likelihood a disagreement will arise either between the business owners or with the business’s creditors, customers, lenders or contractors. These disagreements are commonly referred to as commercial disputes. Their outcome can be the difference between profitability or loss and in extreme cases, may result in the business ceasing operations. It’s important for business owners to be aware of this risk, how to prevent it upfront and mitigate its impact if it becomes unavoidable.
Common Types of Commercial Disputes
Breach of Fiduciary Duty or Responsibility
Fiduciary responsibility includes acting in the best interest of the enterprise as opposed to the best interest of a single individual, disclosing all relevant information to interested parties and maintaining confidentiality. Business owners accept a level of fiduciary responsibility whether that is to their business partners or outside investors.
This responsibility is typically implied based on the trust between those entering business relationships together but is often memorialized in corporate documents such as operating agreements, articles of incorporation or bylaws.
When fiduciary responsibility is breached, the entity is susceptible to being taken advantage of by those individual(s) who have breached it, causing undue harm to everyone else.
Breach of Contract
Executing a contact is a necessary step in any business transaction because it outlines expectations of both parties legally protecting their individual interests. There are many types of contracts and due to their prevalence makes breaching them one of the most common types of commercial disputes.
Contracts are breached when one or both sides to the transaction fail to meet the agreed upon expectations causing harm to the other side. The severity of the breach determines the compensation awarded to the harmed party.
Intellectual Property Infringement
Intellectual Property includes trademarks, copyrights, trade secrets, ideas, research, name recognition or patents. These are typically considered intangible assets on a company’s balance sheet and are an important factor in staying relevant and competitive in today’s fast-paced world.
When an individual or an entity infringes on another company’s intellectual property, they are stealing what makes that business recognizable to the public making them vulnerable to reputation damage.
Commercial Dispute Resolution
A common resolution for commercial disputes is litigation. Litigation has the benefit of allowing an unbiased judge or jury hear the facts and make the final decision. However, litigation is expensive and time-consuming, resulting in organizations seeking alternatives. One requirement of seeking alternatives is that the parties must be willing to negotiate. Depending on the severity of the dispute, negotiating may not be a viable path forward. Some common resolution alternatives are discussed below.
Arbitration has the benefit of being legally enforceable but without the cost of litigation. An unbiased, neutral arbitrator hears both sides of the dispute and assists the parties in coming to a mutually beneficial agreement. This alternative resolution is only successful if both parties are committed to moving forward amicably.
Mediation has the benefit of being less expensive but is not legally enforceable unless mandated by the court. The mediator acts in the same manner as an arbitrator focusing on coming to an agreement through talking through the issues and coming to a solution bringing the dispute to a close.
Facing a Commercial Dispute?
If your organization is involved in a commercial dispute, obtaining legal or financial help early in the process is essential. Going through a commercial dispute without the help of financial advisors or legal assistance can be detrimental to a company, either due to monetary loss or reputational harm. Navigating these disputes with experienced professionals can ensure that your company “comes out the other side” in better shape.
Our team of professionals can assist with the financial complexities surrounding business disputes including calculating and summarizing evidence of economic damages, providing expert testimony on economic damages sustained and providing financial analysis and testimony in defense of a claim against you. Contact us today for more information.