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8 Factors That May Result in Business Litigation

Running a business is a challenge, especially when it comes to dealing with issues that may cause litigation. No matter how severe the business dispute is, the first step towards resolution should be to go for an informal resolution. In most cases, it is in the best interest of both parties to avoid litigation, remain open-minded and find sound legal advice to come to an agreement and move on.

However, there are a few circumstances when business litigation becomes unavoidable. When the negotiations reach a deadlock, the only option you have is to take the matter to the court. Here are a few factors that can cause a business to face litigation:

  1. Breach of Contract:

One of the most important matters that cause business litigation is contract disputes. Business relations are built on contract. Be it a business partner or, supplier or landlord, every relation is bound to a contract. Conflicts arise when there is a breach of contract from any party. There are many forms of contractual disputes, such as failure to meet contractual duties or non-compliance with few contractual clauses. There are other important contractual disputes that are also very common, such as, failure to fulfill the payment or performance duties, interference with the contract, etc.

  • Breach of Confidentiality:

Breach of confidentiality by customers, employees or vendors may lead to litigation. Business contracts include confidentiality clauses. The parties signing the contract are legally bound in not sharing confidential details of any party.

Confidentiality includes terms of the agreement, information about parties, business practice, products, data, or medical information in case of the patient.

  • Misuse of Trade Secrets:

Misuse of trade secrets is similar to the breach of confidentiality. When a person obtains a company’s trade secrets through improper means such as bribery, theft, or breach of confidentiality, and publishes it knowing the fact that someone acquired it in the wrong way, the person has ‘misappropriated’ the trade secret. In this case, the company may have a legal claim against the perpetrator for ‘trade secret misappropriation.’

Trade secret refers to secret information that gives a competitive business advantage to the owner over other competitors. It is essential to put reasonable efforts to protect the secrecy of information.

  • Breach of Non- Competition and Non-Solicitation Agreement:

Non-competition and non-solicitation agreements are important provisions of a contract that protect customer relationships and goodwill of a company. And this is achieved by restraining employees who leave the company to compete against the former employer for a certain period of time, within a certain territory.

If an employee breaches this provision of the contract and competes against the former employer, he or she can file a lawsuit against the employee for this type of breach of contract.

  • Breach of a Fiduciary Duty:

Sometimes business owners have a special relationship with another business owner and develop a high level of trust and confidence in that person. This specific relationship may lead to a fiduciary relationship. For instance, the relationship between the partners or board members of a company.

The person has a fiduciary duty to keep the relation honest and trustworthy.  Breach of fiduciary lawsuit occurs when there is a betrayal in which a partner steals a partnership client for his own benefit. The plaintiff in this type of litigation must prove that there was fiduciary duty existed, breached and hence caused the damage to the plaintiff.

  • Incidence of Fraud:

Fraud lawsuit is based on a lie. There can be different forms of lie such as misrepresentation or concealment of a fact that should have been disclosed. The plaintiff in such a lawsuit must prove that he or she relied on the facts presented which caused damage to him or her. If the plaintiff knew that the person was lying, the lawsuit cannot be filed on the basis of fraud. Moreover, if the person lied and no damage was caused, no viable cause of action will take place.

  • Infringement of Intellectual Property:

Intellectual property rights include trademarks, patents, and copyrights. These are the most valuable assets of a company. The use of a similar trademark to using copyrighted material without permission of the company may lead to litigation on the basis of intellectual property infringement. Intellectual-property related issues may cause litigation.

  • Shareholder Disputes:

Regardless of the fact that how well a plan has been devised, business partners usually find themselves in odds. The most common issues in partnership conflicts and shareholder litigation are related to the misappropriation of funds, financial issues, breach of fiduciary issues or other disagreements over the business.

Check Dispute Resolution Terms Before Litigation or Arbitration:

While litigation is an effective way to resolving dispute however, it should be kept as the last resort. The reason is many business disputes are resolved through arbitration. This provision is included in most of the commercial contracts to resolve the matters out of court. However, if you are still unable to resolve the conflict, you can hire a business lawyer to initiate the process of litigation. The lawyer can help you in resolving complex commercial disputes.

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