Commercial claims are an unfortunate fact of life for most businesses. They can be stressful and expensive to deal with. But there are things you can do to reduce the threat of claims against your company. Make sure you have a written contract, that your terms apply and:-
1. Limit the types of claims you will accept responsibility for or exclude certain types of claims completely. If you have the right clauses in your contracts to do this, it’s possible to limit your liability in a sale of goods or services transaction, for example, to exclude liability for consequential damages and provide for a cap on liability.
2. Make sure you are not responsible for any claims by another party. Did you know that if a third party would benefit from enforcing a term in your contract, it may have the right to do so? Take steps to reduce your exposure to such claims by having the right kind of clause in your contract regulating the rights of third parties to enforce contract terms or stopping them from being able to do so at all.
3. Agree to try and resolve any dispute by way of discussions first. It’s good to talk! You can agree in advance the way in which any dispute that may arise will be dealt with. However, you should consider whether this is going to be appropriate for you in all cases. For example, you may find that unfortunately for whatever reasons, several disputes may arise with various customers at the same time. Individually, the amounts may be relatively small but collectively, it’s all having a serious effect on your cash flow. So ask yourself whether in that situation you would want to be prevented from being able to act quickly to issue claims if necessary.
4. Make any claim subject to notice periods so that if it is not brought in time the claimant will be time barred from bringing the claim against you at all.
5. Think about who you are doing business with. Are they credit worthy? Do you need an upfront deposit or third party guarantee?
6. Make sure you comply with all relevant Regulations.
We are not saying that if you do all of these things you will avoid claims completely but you will reduce the threat of claims. In a subsequent blog post we will be looking at what you can do to reduce the impact of claims in the event a claim is brought against your company.
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