Resolving Business Disputes Effectively: A Guide to Navigating Common Business Disagreements

Businesses are complex operations; even the most simple business model relies on various suppliers, distributors, and other business partners to provide the goods or services it sells to its customers. With many moving parts involved, it is inevitable that disagreements will arise from time to time. Navigating these disputes effectively can spell the difference between a quick, peaceful, and low-cost resolution and escalation that requires drawn-out legal action and costly business litigation. Business litigation requires a lot of the business owners’ time, energy, and financial resources, which can take a toll on regular business operations. Effectively resolving business disputes early and peacefully can save all parties significant time, money, and headaches. In this short guide, Abrams Valuation Group, Inc. explores common business disputes and strategies to resolve them successfully.

4 Common Business Disputes

1. Contract Disputes

2. Partnership Disputes

3. Intellectual Property Disputes

4. Business Torts

1. Contract Disputes

A contract dispute arises when one party believes another party has failed to meet their obligations as defined under a legally binding agreement. Contractual disputes can involve any aspect of the contract including interpretation of the terms, extent of obligation, or consequences of non-compliance.

Examples of Contractual Disputes

Here are some examples of contract disputes that can arise between parties:

• Failure to Deliver Goods
• Violating Confidentiality Agreement
• Incomplete Work
• Change in terms without Agreement
• Non-payment for Services Rendered

Contracts are legally binding documents that outline each party’s obligations to one another. Failure to comply with the terms of the contract on either side will inevitably lead to a dispute and necessitates business dispute resolution.

2. Partnership/Ownership Disputes

Partnership disputes arise from disagreements between individual owners involved in a business partnership. Multiple issues can trigger these types of disagreements including differences in management styles, financial responsibilities, contribution levels, or personal conflicts. Since partnerships are usually close business relationships, these disputes can become especially complex and emotionally charged, often compromising the partnership’s ability to function effectively.

Partnership disputes benefit tremendously from neutral third party intervention to facilitate communication between the sides during negotiations. However, due to the often highly emotional aspects of the disagreement, ownership disputes can easily escalate to full-blown litigation.

Examples of Partnership/Ownership Disputes

• Profit distribution disagreements
• differing business goals and visions
• minority shareholder oppression
• partnership dissolution
• Financial mismanagement allegations
• Key Business Decision Conflicts

When partners or owners disagree on key business decisions and operational methods, it can seriously impede the regular functioning of the company and bring the business to a grinding halt. It is crucial, therefore, to reach a business resolution as quickly as possible.

3. Intellectual Property Disputes

Intellectual property (IP) disputes arise from disagreements over the ownership, use, or infringement of IP rights. Intellectual property such as patents, inventions, customized software, trade secrets, and branding assets are crucial for businesses, and IP disputes can be extremely disruptive to normal business operation, marketing, and sales. Therefore, it is essential to resolve IP disputes as quickly and amicably as possible to enable the business to function regularly once again.

Examples of IP Disputes

• Copyright violations
• Trademark confusion
• patent infringement
• license agreement breaches
• Trade Secret Theft

Intellectual property is often essential to the key business operations, and it is imperative for businesses to proactively protect their intellectual assets through careful management, clear agreements, and swift dispute resolution in case of infringements.

4. Business Torts

Business torts are wrongful actions that harm a business’s reputation or operation, and generally result in the business suffering a financial loss. Often, business torts involve competitors, employees, or other third parties meddling with business relationships, engaging in slander or libel, or other unethical practices that harm the business. Victims of business torts usually seek damages or compensation for the financial losses as a result of the tort.

Examples of Business Torts

• Interfering with Contractual Relationships
• Fraudulent Misrepresentation
• Business Defamation
• Unfair competition
• Breach of fiduciary duties

Business torts negatively impact even the best business relationship, operations, and revenue in the corporate landscape, and it is crucial to work quickly towards resolving disputes that arise.

Business Dispute Resolution Process: Try ADR Methods First

What is ADR?

ADR stands for Alternative Dispute Resolution and includes all forms of nontraditional courtroom litigation to reach a resolution to a dispute. Depending on the ADR method that the parties involved agree to use, they may resolve the dispute solely between the parties themselves or with the help of a neutral third party. Alternative dispute resolution methods like mediation and arbitration are often faster and less expensive than litigation.

Mediation

Mediation involves a neutral third party who facilitates communication and negotiation between the disputing sides. The mediator facilitates open communication and negotiation, helping the parties explore their interests, identify common ground, and work towards a solution that is satisfactory to both sides. Unlike other methods of dispute resolution, mediation is typically voluntary and non-binding, meaning that the parties have control over the outcome and are not obligated to accept the mediator’s recommendations. Because it emphasizes collaboration and communication, mediation can often lead to more amicable solutions compared to more formal dispute resolution methods.

Arbitration

Arbitration is a more formal alternative dispute resolution method where the disputing parties appoint an impartial third party arbitrator to listen to both sides of the dispute and render a final binding decision. A key difference between arbitration and mediation is that the arbitrator’s final ruling is legally binding, unlike the results of mediation, which are not binding unless formalized by both parties afterwards. Arbitration more closely resembles formal courtroom proceedings, with the arbitrator holding the power to determine the admissibility of evidence, ask clarifying questions, and make a final binding decision. However, arbitration generally has a much quicker resolution time and is far less costly than formal courtroom litigation.

Other ADR Methods

Mediation and arbitration are the two most commonly used forms of ADR. However, there are a few more less commonly used types of ADR that disputing parties involved can use as well. These include:

• negotiated rulemaking
• neutral factfinding
• minitrials

Resolving Disputes Effectively

1. Stay Calm

The first step in resolving business disputes effectively is to remain calm and collected. Although friction is inevitable when a disagreement arises, try to keep the tone calm and level. This mitigates unnecessary escalation, and allows all involved parties to remain rational and focus on the facts.

2. Gather the Facts

Compile factual, impartial evidence about the dispute. This is essential for laying the foundation of successful dispute resolution. Once the facts are clearly laid out, it is much easier to find common ground for negotiation and conflict resolution.

3. Get a Business Appraisal

Whether you’re trying to establish the scope of damages for a business tort or navigate a fair partnership dissolution, an impartial and accurate business appraisal is a crucial starting point to facilitate a fair and lawful business dispute resolution.

4. Start with ADR Methods

Consider first using alternative dispute resolution methods to bring a quick and low-cost resolution to the issue.

5. Escalate to Traditional Litigation if Necessary

If ADR methods were unsuccessful at helping the parties come to an agreement, then traditional business litigation may be the next appropriate step to reach a fair resolution to the business dispute. Keep in mind that the process can often be lengthy and costly. However, if all other methods of resolution were exhausted, that may be the last resort. 

How Can a Business Valuation Assist Business Dispute Resolution?

A business valuation from an impartial appraiser can help resolve business disputes quickly and more effectively on several fronts. A business appraisal quantifies the dispute in hard factual numbers and can document the difference in business value before and after an alleged tort, for example. This is crucial when trying to establish business damages and seeking reparations through either an ADR or classic litigation process.

An appraisal can serve as strong supporting evidence for either party in building a strong case. Additionally, an impartial appraisal serves as a natural spring board for negotiations, as it establishes the actual present value of the company without bias or blame and allows the disputing parties to negotiate the next steps from there.

Hiring an appraiser to serve as an expert witness in either ADR or courtroom proceedings can also lend further credibility to the case, as the appraiser fields cross-examination questions from the arbitrator or opposing attorney. The neutral stance of the appraiser establishes the expertise and factual nature of the appraisal and allows the business appraisal to facilitate a faster dispute resolution.

Abrams Valuation Group, Inc. has performed hundreds of business appraisals for business dispute and litigation purposes. Our business valuation experts have also appeared in ADR and courtroom settings to provide expert witness services and litigation support to our clients, often making a substantial difference in the judge and jury, arbitrator, or mediator’s clear understanding of the impact of the business dispute on the company value. Many of our litigation clients have said that AVGI’s expert witness testimony was instrumental to the outcome of the litigation. Contact us today to set your business dispute resolution on the right track.