I grew up in a world where a handshake constituted a binding contract that need never be enforced in a court of law and where a person's word was more important than money. I can't say that I see those principles much today for a couple of reasons. Firstly, there are a lot more people today and therefore a lot more liars, a lot more looters and moochers, and a greater need to protect the interests of the rest. Secondly, our lives and our world are immeasurably more complex than they were fifty years ago.
The bottom line is that contracts and "litigation mitigation" pervade our business lives these days because law suits spring up every day over disagreements concerning copyrights, patents, real estate transactions, ownership, contract performance, liability, employment and for hundreds of other reasons. Employers have every right to be concerned and devote their attention to preventing lawsuits - just one bad lawsuit can destroy a company's future and ruin lives.
Good documentation and consistent practices are the cornerstones of a good defense against frivolous or wrongful lawsuits (avoiding legal action with employees, OSHA protection, minimizig litigation risks). In the absence of good documentation, litigation relies on testimony, i.e., words against words against recollections against fabrications. I'll provide an illustration by example of a client I recently worked with.
A client I consult with was recently involved in a wrongful lawsuit for contractual non-performance (which was actually a counter-suit against a suit by my client for non-payment for services rendered). My client "Joe" had provided services on a particular project over the course of several months and had billed out against that job regularly and communicated status regularly via phone. During each payment follow up communication between Joe and his client Joe's client indicated that they just hadn't gotten to it, but would be sending payment soon. Finally, after nearly a year of attempting to collect payment from Joe's client, Joe finally broke down and filed suit for payment.
To Joe's surprise, he was slapped with a counter suit from his client alleging that his performance under their contract was not acceptable and caused the client monetary damages. Unfortunately for Joe, although he and his staff had regularly communicated status to the client and had been told by the client on multiple occasions that they would be paid and that the work was excellent, there was no documentation to support it. Joe's insurance company settled and Joe actually lost his contract proceeds, the time and efforts of his staff and experienced increased insurance premiums as a result of the settlement. What went wrong?
What went wrong was that Joe was unable to provide enough evidence to establish that there was regular communication of project status to his client throughout the project lifetime. The client was able to claim that they were unaware of the project's progression and that they had no chance to object to the work being completed as it was completed.
This is one clear cut case where some consistent knowledge management practices would have gone a long way. If, for instance, a regular schedule of client contact was in place company-wide it would have been easier to establish that it was likely that the client received regular communication since all Joe's clients receive regular communication. Second, if each communication was well documented complete with subject matter, Joe would have had a much better chance at convincing a judge that the client was apprised of project status with no disapproval.
The short and skinny: two great ways to avoid litigation are to be consistent with client communication and to make sure that all client communication is well documented. The first alone will often lead to better client relationships and reduced chance of misunderstandings or dissatisfied clients. The second does a great job of CYOA in the instances where the first just isn't enough.
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