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Three ways businesses can limit their legal exposure in the UAE

Three ways businesses can limit their legal exposure in the UAE

Businesses should be careful to limit their exposure to a litigation in the event a dispute does arise

The UAE is a global business hub and it consistently attracts investments from across the world with its favorable business conditions. The country provides safety and ease of establishment which enables companies to set up their offices smoothly within the UAE.

Typically any active business – regardless of its sector, partakes in a variety of business activities where transactions are made, agreements are signed, and employees are appointed.

The larger the business, the higher the risk of facing multiple disputes. For many, the notion of navigating this unknown territory is vague enough to put them off from starting their own business altogether, but this doesn’t have to be the case.

From a legal point of view, it is challenging to shield a business from litigation cases. No matter how organised or “law abiding” a business is, there is always a risk of being subjected to legal proceedings. No matter how much a business honours its contractual obligations, it cannot guarantee that its counterpart will provide the same courtesy, in other words a business may be forced to initiate legal action.

The good news is a business can minimise the chances of entering a litigation case with some diligence. From a lawyer’s perspective the best clients to represent are those who have taken certain measures into account, which makes it easier for a lawyer to act on their behalf.

Here are three key measures which can limit the exposure of your business in the event a dispute does arise:

1. Get a lawyer to review everything

A well drafted agreement, developed by an experienced lawyer, will limit your exposure should a dispute arise.

For example, if a business enters into an agreement pursuant to which it is contracted to deliver products on a certain date, it may be at risk of violating a late delivery clause and hence face a penalty.

If a business didn’t correctly interpret the legal terminology or understand the implications of a penalty clause from a legal standpoint, a lawyer will highlight the risks associated with a clause and suggest alternative wording which limits the business exposure.

Sometimes it is as simple as changing a few sentences in a specific clause. When done by an experienced lawyer, this will be the difference between a company’s survival and its virtual bankruptcy.

2. Consult before negotiating

Hypothetically, if a business is facing a potential dispute, it should attempt to amicably solve the matter before the matter is taken to court. This is the right approach.

Settling a dispute out of court allows a business owner to avoid hefty legal fees and what is likely to be a long winded, time consuming court case until the dispute is resolved.

Having said that, understanding the business’ legal rights and obligations is vital to avoid unnecessary waivers or committing to unjust obligations. This is where a lawyer comes in.

A lawyer will explain the potential outcome should the matter go to court and the associated costs. This puts the business owner in a better position to negotiate a settlement which is in best interest of the business.

In addition to this, a lawyer can stress how important it is that no written acknowledgments are made as they will be considered binding, and the business will be held accountable for it.

3. It’s not what is claimed; it’s what can be proved

A good lawyer will always advise that a claim is worthless without a valid proof. Therefore, all company records, including original documents will be taken into account.

For instance, let us suppose that a business entered a transaction pursuant to which a cash payment was made but the product or service paid for was never received. If the provider claims a payment was never received, hence no delivery was made, how could you prove the supplier is in the wrong?

This is just an example of how easily a claim could be lost for lack of sufficient supporting documentation. Therefore, it is imperative to have all the records intact, and to ensure all original documents are stored in a safe place, as photo copies do not suffice in most cases.

Litigating in any jurisdiction can be lengthy, costly, hectic and in some cases, inescapable. However, it does not have to mean that the business is utterly exposed.

While the law does not guarantee justice, it does provide an outlet to seek justice, and ensures that business owners are well placed to protect their businesses whenever a need arises.

Abdullah Ishnaneh is partner at BSA Ahmad Bin Hezeem & Associates

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