Business disputes are inevitable. Whether it’s a problem with one of your vendors or a complaint from one of your customers, every business owner has to be prepared to deal with business disputes. In our legal practice, we do not market our litigation skills, but rather our litigation avoidance skills. Litigation is generally costly and can ruin small businesses. Successful business owners find ways to resolve business disputes as quickly and economically as possible.

In the hvacr industry, disputes with customers are probably the biggest challenge. Under most state laws, residential customers fall within the definition of “consumer” under various consumer protection laws. These laws may impose special obligations on you in terms of disclosures in your contract, and they may or may not limit your ability to use alternative forms of dispute resolution, such as mediation or arbitration. Thus, the first step in developing a plan to resolve customer disputes is to know what is permitted under state law.

Hopefully, your state does permit alternative dispute resolution, that is, the right to require that disputes be resolved through a method that does not involve litigation. The two most common forms of alternate dispute solution are mediation and arbitration.

Mediation is a process that is designed to help parties reach a compromise. A neutral party, the mediator, offers suggestions and options for settling disputes that the parties may not have considered. Mediation is relatively inexpensive and requires very little preparation. While there is no guarantee of a resolution, several professional mediation groups report success rates of 85 percent or higher with respect to commercial matters.

Arbitration, unlike mediation, is designed to reach a final result. The process operates much like litigation in that a trier of fact listens to both sides of the case, considers evidence and testimony, and renders a final decision. Frequently, agreements require that the arbitrator’s decision is final and non-appealable. Since the process is adversarial, it is generally more costly and more time intensive than a mediation.

The key to taking advantage of alternative dispute resolution is to include provisions in your service agreements to require mediation or arbitration of disputes. Many states have set up mediation programs. For example, one county in Ohio requires that all civil matters filed in small claims court be first referred to mediation. If there is a formal mediation structure associated with the courts or with some other independent organization (such as the Better Business Bureau), consider requiring use of that mediation service in your agreements.

Don’t be afraid to give the mediation provision a prominent location in your service agreement. In reviewing your service agreements with customers, explain to them that you have included mediation in the contract in order to provide your customers with an inexpensive way of resolving problems if you and the customer cannot resolve a dispute. If written properly, a mediation provision will be viewed as consumer friendly.

Of course ultimately, the best way of avoiding disputes is to anticipate potential problems and to address them with your customer before beginning business. Sometimes, it is simply a matter of anticipating and managing a customer’s expectations. Ultimately, the best dispute resolution is one that leaves your customer reasonably satisfied and your business reputation intact.

Michael P. Coyne is a founding partner of the law firm, Waldheger Coyne, located in Cleveland, Ohio. For more information on the firm, visit www.healthlaw.com, or call 440-835-0600.