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By Fred Steingold
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Fred Steingold, a business lawyer in Ann Arbor, MI, is the author of
Legal Guide for Starting and Running a Small Business, The Employer's Legal
Handbook, and How to Get Your Business on the Web (all published by Nolo Press).
Q. My small business sells services to other small businesses. We do good work and rarely receive any complaints. Still, I'm concerned about getting tangled up in a lawsuit if a customer has a serious disagreement with us. Any suggestions?
A. Sooner or later, almost every business is likely to get into a dispute with a customer. But it doesn't have to turn into a lawsuit. Often you can resolve a dispute through negotiation, in which you and the customer compromise. In really sticky cases, you can bring in a mediator -- a skilled outsider who can help you find a middle ground.
If neither negotiation nor mediation works, there's another alternative: Stipulate in contracts that all disputes must be arbitrated. (If you don't have a clause in your contract, you and your customer can simply agree to arbitrate -- even if a lawsuit has been started.)
In arbitration, you get help from a neutral third party who can sort out the facts and make a legally binding decision. It offers many benefits. For one thing, it's usually much less expensive and time-consuming than traditional litigation. What's more, it's private: There are no public records for nosy outsiders to see and no trials in open court. And arbitration usually avoids the adversarial tone of a lawsuit. Result: You may be able to continue doing business with the customer.
What are the downsides? First, you waive the right to a jury trial. And, except in rare cases, you don't have the right to appeal. But, usually, the benefits of arbitration outweigh the potential negatives.
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