Briefly

TRANSCRIPT

00:07
Adam Stofsky
So now let's turn to what happens when things like really go wrong. So when someone just full out breaches the contract, they don't pay or they don't deliver, or they do something else that breaches the contract, or if there's some issue that comes up that the contract does not address at all, what happens then?

00:26
David Tollen
Yeah, so there's different levels at which this can happen. So maybe what's happened is that the contract really doesn't address what happened. You didn't come up with it in advance, and so the contract says nothing about it, or the contract says nothing clear about it. You maybe can extrapolate from other places in the contract, but it's just not that clear. And so each party is probably going to choose the interpretation that favors it. Or maybe the contract's relatively clear and someone's just not doing what was promised. Either way, you have a potential dispute on your hands. The natural thing may be to think, well, we're just going to have to sue them. But that's a bad outcome. If it has to go to litigation. You're going to spend an enormous amount of money, a lot of emotional difficulty.

01:20
David Tollen
Most likely you may end up getting very poor value from the lawsuit. And so ideally you're going to other solutions first, like sending a request. You know, start out by requesting that the other party comply, possibly with an explanation for why you think that they are required to do that. And that might come in the form of a very casual oral request, anything to a carefully written demand letter by a litigation attorney who has assessed your best position and puts it in paper, and also helps you avoid saying anything that you'll later regret because you don't want to take a stand that's inconsistent with your position one way or another you're requesting or demanding, and those are on a spectrum, that the other party comply with the contract as you interpret it.

02:15
David Tollen
And that is certainly something you want to do before filing a lawsuit.

02:21
Adam Stofsky
Well then what happens?

02:23
David Tollen
Hopefully the other party, you know, agrees to that, maybe the other party doesn't. So there you're in a settlement, settle or sue situation. Well, a better way to put it, drop it, settle it or sue.

02:36
Adam Stofsky
To go back to what you were saying earlier is that it's a business decision, right? This is not really a moral decision, you know, if you like, so brieflynow, we do custom projects and we do services and people give us money. So let's say we finish the services, we deliver the videos and our client says, you know what, we're not going to pay you that last $5,000. So I have options. I can, you know, I can demand it from them and I can threaten them. I can beg them to pay, or I can sue them. And then if the lawyer that I talk to says, well, it's going to take you about six months and about 80 hours of your time and $50,000, it's clearly not worth. And you might not even win. Right.

03:21
Adam Stofsky
It's clearly not worth it to file that lawsuit for a $5,000 dispute.

03:27
David Tollen
That's right. That's in that drop it, settle or sue assessment. You gotta keep in mind a paradigm, a maxim I like from the Godfather, which is where the consigliere says, sonny, it's just business. It's not personal. You may be really mad about the other party's choice, but if you're in a business contract and your goal is to make the business profitable, your question should not be, what's truly just? And what's going to make me feel better so much as, what's the most profitable path for our company? And if you're looking a $5,000 dispute with $50,000 of litigation fees, suing is definitely not going to be the most profitable path. And as excruciating as it may be, the profitable thing is to let it go or, you know, see if you can get some kind of compromise out of the other party.

04:22
David Tollen
It may be the threat of lawsuit gets you somewhere. By the way, in this country, in most jurisdictions, a really small suit, like $5,000, you might have a cheap lawsuit solution through small claims court, but most business disputes are going to be larger than that. I mean, the unfortunate thing is a lot of business disputes are too big to make any useful use of small claims court, but way too small to be worth suing over. And so you gotta recognize it's business, not personal, and think through what's going to be more likely to be profitable for my company.

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