Income Protection NZ Articles

Risk Management - 8 steps To Avoid Litigation

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Accidents, mistakes and misunderstandings can happen in any business. Some are settled amicably, others grow into full-blown disputes, and before you know it you could be facing a legal claim.

Being sued is stressful, time-consuming and expensive. Even if you win the case the disruption to your business can outweigh any financial gains. A key objective for most businesses is to avoid being drawn into litigation in the first place and here we outline the steps freelancers can take to safeguard their business against litigation.

Eight steps to safeguard your business

Professional contract agreements.

No work should be done without a contract. Always have one in place that defines scope of services and terms of remuneration before you commence an assignment. Without an agreement the opportunities for misunderstanding and controversy are numerous.

Documentation and tracking changes.

A common source of dispute is when the client believes they have asked for a solution that does one thing only for the freelancer to deliver a solution that does another. Know who is responsible for when things go wrong. Meticulously document client requirements and be particularly vigilant when changes creep into a project - as it is easy to lose track of them. Make sure all changes are costed and signed off. These records will be of immense value in defending against legal claims.

Checking work.

Freelancers are not required to be perfect. However, this does not relieve them from the obligation to check their work because this is one of the standard systems used to discover and correct errors. Errors, per se, are not evidence of malpractice, but failure to check the work product is.

Communications with the client.

Many of the claims made by clients are not for serious damages but are based simply on discontent and dissatisfaction with the Freelancer. This is often brought on by the Freelancers own lack of consideration of the client. Seemingly minor things such as missing deadlines, lateness to meetings, unavailability by telephone, failure to return emails, and failure to keep the client informed at all times. With this background of discontent, a real problem such as exceeding the cost or time budgets will trigger an avalanche of serious legal problems. The best way to keep clients happy is to treat them with respect, keep them informed, and maintain a friendly relationship.

Early recognition of potential disputes.

When issues do arise, dealing with them quickly and professionally can prevent them developing into a major problem. Burying your head in the sand never makes disputes disappear. Deal with complaints in an appropriate way and seek advice from a solicitor who understands IT law if your issue escalates. Most insurers offer a free 24 hour advice helpline, which will put you in touch with experts on how to best handle your situation.

Early recognition of potential disputes.

When issues do arise, dealing with them quickly and professionally can prevent them developing into a major problem. Burying your head in the sand never makes disputes disappear. Deal with complaints in an appropriate way and seek advice from a solicitor who understands IT law if your issue escalates. Most insurers offer a free 24 hour advice helpline, which will put you in touch with experts on how to best handle your situation.

Meeting budgets

Costs.

Clients become very dissatisfied and resentful when costs exceed the approved budget. In such situations, the client may give serious consideration to making claims against the freelancer as well as withholding payments of professional fees.

Time.

Overall scheduling of a project should be realistic and should be updated whenever necessary. Client approvals should be sought all along the way. When the client is counting on use of the project at a certain date, failure to receive it will often be very expensive. Freelancers must avoid being a contributing factor in schedule slippage by failing to make prompt decisions and delivering work late.

Fees and charges.

Many client dissatisfactions are based on fee disputes. In some cases this is because the billing is not clear and consistent with the written contract. All invoices should be rendered on time and strictly in accord with the contract. If the bill is not paid within a reasonable time, the best thing to do is talk to the client to find out if there is any misunderstanding. A billing adjustment to satisfy a client at this point will usually be less costly than fighting and paying lawyers later.

Have an up to date Professional indemnity insurance policy in place.

Litigation is always costly, however big or small your case is. It makes sense to have an up to date Professional Indemnity Insurance policy to defend your legal position-just in case. Read the policy wordings carefully and make sure they are relevant to your profession.

Although we may never achieve perfection, we can at least try. By being constantly alert and aware of the usual sources of errors, we might lessen their occurrence. From time to time we should stand back and take a good objective look at our operations.

Even minor improvements could prevent or avoid some economically ruinous claims.

These suggestions above are not all-encompassing, but should help you avoid being sued by your client.

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