While no business wants to face a lawsuit, they are commonplace—and expensive. A breach of contract case could cost as much as $91,000, according to a report by the Court Statistics Project, which could prove especially disastrous for a small business.
Should your company ever face a lawsuit, general liability insurance, professional liability insurance, and cyber liability insurance could help cover some of your costs. The best thing for your business, however, is to prevent lawsuits and reduce liability with the following tips.
Set Realistic Expectations
Whenever working with clients or partnering with another contractor, start with a reasonable timeline and list of expectations. This way, you don’t overpromise and underdeliver, or run the risk of being accused of breach of contract.
Be sure to include detailed wording in your contract of what’s included in each step of the process for your project and what each party is responsible for. Create a checklist for completing all your tasks on time. Discuss each party’s expectations, so there are no misunderstandings from the beginning.
Put Everything in Writing
Always draw up a contract or agreement for all your business dealings to protect both parties. When putting together your contract, list every detail of what you’re required to deliver, along with what is not included in your responsibilities to prevent misunderstandings. Be specific regarding price quotes and what is included with the pricing. It’s best to hire a lawyer to draft your contracts rather than using one you find online.
Sign Off on Changes
Be upfront with clients and business partners about potential changes in the scope of the project. If any significant changes are made after signing the initial contract, they should require signing off. This sets clear expectations in case additional changes are needed.
Work with Insured Contractors
Whenever working with contractors, you want to make sure the contractors, as well as any subcontractors they may be working with, have professional liability insurance. If anything goes wrong with a project, and the subcontractor is at fault, the liability should fall on them and not your business.
Set Up Quality Control
Establish a quality control system in which employees or managers check each other’s work to prevent mistakes, accidents, or ensure you’re following through on the project expectations. It’s easy for someone to misunderstand directions, and you want to catch these slip-ups before they turn into a costly or litigious situation.
Partnering with other businesses and contractors can be tricky when it comes to misunderstandings or missing the mark on expectations. Communication, documentation, and quality control will all help prevent lawsuits and lost business. Find out whether your insurance coverage is enough to protect your business by consulting with an insurance expert.
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