This chapter is an extract from LegalVision’s Online Business Manual. Download the full guide here.
Unfortunately, even if your business has a great product which customers love, there may come a time when you find yourself in a dispute with someone that you are working with or for.
These types of disputes can be tricky for a number of reasons:
- you may lose a customer and the potential future revenue that the relationship might have generated;
- there are risks to your reputation and brand, which are particularly challenging if your business has a social media presence;
- if the dispute is with a supplier, you may need to find a new organisation to work with, which can come at a significant cost;
- if the dispute is very serious, you could get sued or find yourself needing to sue someone; and
- a dispute will take time away from the most important thing for any business owner — running your business.
Disputes commonly arise because of a difference in expectations between you and your customers. A customer may be upset because the product quality or delivery speed didn’t meet expectations. In this context, it is unlikely that disputes will begin with a letter threatening legal proceedings. Rather, dissatisfied customers are likely to ask for a refund or for you to fix the problem.
The reasons that a dispute with a customer may arise will depend on what your business does. For example, if you have a SaaS business, customers may be unsatisfied when your service isn’t available, is operating too slowly or has glitches.
Ensure your business terms and conditions include suitable warranties, disclaimers and limitations of liability as to the level of service or quality of product you provide to manage and limit your risk. Doing this can provide you with some measure of protection if a customer tries to sue you for damages they claim to have suffered because of a failure in the product or service you have provided.
It’s easy to find stories of business woes where a manufacturer based overseas has failed to deliver, stolen intellectual property, or manufactured poor quality goods. You can avoid this scenario by taking two steps:
- Pick trustworthy suppliers: If you already have a connection with a trusted supplier, ask them for recommendations. Meet suppliers in person, if possible. Phantom order the product for yourself first to check quality and order times, and seek samples before you place a full order.
- Ensure legal contracts are in place to protect your interests: Your manufacturer’s agreement should set out the responsibilities and rights of both parties. For example, a well-drafted intellectual property clause should not only protect the intellectual property you created, but also should assign (i.e. transfer) any intellectual property created by the manufacturer as part of the contract.
If you want your online business to succeed in the long term, most disputes will require a customer-centric approach. Offering discounts, free services and other commercial resolutions will build customer goodwill and your reputation for service. Therefore it’s sensible to think about your approach to respond to dissatisfied customers. For example, Uber employs teams of ‘customer happiness officers’ who won’t hesitate to refund a user for anything less than stellar service. If the worst-case scenario does happen, and you find yourself in a situation where a customer is threatening to commence proceedings against you, you have two options:
- settle on commercial terms (ideally recorded in a formal deed of settlement); or
- go to court.
Court proceedings are very expensive, can take years to finalise, and can be disastrous to your reputation and brand. If you’re considering going to court, make sure you’re doing so for the right reasons and that you have spoken with a lawyer about your prospects for success.
A Customer Centric Approach
- Offer a discount
- Refund the service or good
- Offer a free upgrade
- Train staff on dispute resolution processes
- Make it easy for customers to contact you
- Give personalised attention
- Resolve quickly
If you have any questions about settling disputes with customers or suppliers, you can contact LegalVision’s online business lawyers by calling 1300 544 755 or filling out the form on this page.
This chapter is an extract from LegalVision’s Online Business Manual. Download the free 53-page manual which includes all chapters and features case studies from NAB, Deliveroo, Airtasker and HubSpot.
This manual covers all the essential topics you need to know about starting your online business, including setting up your online business, protecting your brand, growing your team and scaling your business.
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