Business owners, executives and managers are well aware of something more frustrating than rush hour traffic: clients or customers who don’t fulfill their obligations. So, what are your options? One option is to take legal action against your client or customer. However, before you do so, consider these 6 steps.
If you have a contract with your customer, before you toss around accusations you should review it to see what your client was legally required to do, while evaluating your obligations and remedies under the contract. For example, some contracts contain provisions which dictate how any disputes must be resolved (e.g., arbitration versus litigation), and where such disputes must be resolved.
Before suing a client, you should assess your own performance and management.
Asking yourself these tough questions can help avoid a messy lawsuit in which your client files counterclaims against you for breach of contract.
If you have a dispute with your client, working out the problem informally can lead to prompt resolution, or at least a resolution which saves you the cost and time associated with a legal dispute.
Find out why your client is not paying or otherwise breaching the agreement.
Between assuming all is lost and filing a lawsuit, there are some additional steps to consider:
If you do not have documentation of the client’s failures, or evidence exists of your own failures, it’s likely that you should not pursue legal action.
For a defamation case, there should be evidence of statements that are:
If you do have adequate documentation, ask what a lawsuit would do to your business. Suing a customer may not only result in a loss of future customers, it might also damage your brand. Assume a lawsuit will generate a great deal of negative press. Even the most tactful publicity director will have difficulty wiping away the image of “strong corporation bullies small-town client”. Evaluate the chances of winning your case, and engage in an intensive cost-benefit analysis. You should never invest more than you are owed into small claims court. While the process is not typically expensive, you should calculate the exact cost. If your customer owes substantial fees, maybe a lawsuit is best. If you can’t identify your claim or will spend more than the bill in order to prove your case, steer clear from legal action.
The absolute last thing you want after dealing with a bad payer or bad review is another bad payer and bad review. You’ll need all hands on deck to help your company’s image, regardless of whether or not you pursued legal action. Again, evaluation of your needs is key. Oftentimes poorly-written, public replies to disgruntled clients tank businesses. The simple question is what course of action is vital? A one-size-fits-all statement backing up your commitment to service? An overhaul of your employees’ customer service training? The implementation of a more intensive client background check? These are questions that you and your legal counsel can answer. In the end, only take actions that are calculated and necessary.
For questions about filing a lawsuit against a client or customer, contact an attorney at Goosmann Law Firm today to help you navigate the process.