Management: Strategies to avoid lawsuits
Been there, done that. An industry veteran who has been on both sides of lawsuits shares his tips: be explicit in your quotes and try to stay out of court -- the decisions are unpredictable.
March 1, 2002 by Doug Winter, president, Universal Gravo-Plast Inc.
All court cases cost money. This is Winter’s first rule of lawsuits, no matter what side of the decision you are on. One ex-customer owed Universal Gravo-Plast $70,000; in the end, he spent $100,000 to avoid paying the $70,000, which he ultimately paid anyway.
Winter’s second rule of lawsuits is: you do not want to go to court, because the outcome is unknown. Mac Carr-Harris lost a court case over a patented plastic item that had been duplicated exactly, because the judge said, in essence, “These items are different colors, they must be different. Case dismissed.”
QUOTES: KEEP IT SIMPLE
During the 15 years that I have been an owner of Universal Gravo-Plast, we have sued six companies in small claims court, been sued once in general court and sued three companies in general court. Each experience has resulted in changes to our credit policy and to our standard wording for a quotation. Here are some suggestions:
Beware the dates. In court, judges want to see printed proof, so keep copies of all letters, quotations and hard copies of e-mailed quotations. The date of the quotation must be clearly stated. In fact, date everything, including drawings or sketches. Also, make copies of all relevant documents for the court.
Keep it simple and up-front. One judge told a manufacturer the fine print on the back of the quotation is usually too tiresome to read. So, keep it simple and keep important terms on the front of the quotation.
Assume a lack of knowledge. Since Universal Gravo-Plast produces only cores and cavities, it is imperative that customers are alerted to this tooling approach, even if they have seen evidence of this in the plant. Customers are usually not familiar with the intricacies of moldmaking or injection molding. Our quotation states “A visible gate mark appears due to our tooling technique, which comprises core- and cavity-inserts only, usually in QC-7 aluminum.”
Similarly, we never use the noun “mold”; we refer to “tooling”, which the customer owns outright. One young hot-shot acquired his tools, then phoned to yell, “Some of the mold parts are missing.” He was directed to read the quotation, and we never heard from him again.
Give yourself some leverage. “All tooling remains property of UGPI until all invoices are paid in full, parts included.” The customer owns the tools, but cannot take possession until all invoices are paid in full. In one suit, we were forced to relinquish the tools, and then had to fight for payment for the parts.
Beware the dates, part 2. Never put a specific date on a tool manufacturing commitment. Use a range of weeks, even if you firmly believe you can deliver by a specific day. You may have missed something. One customer sued us for loss of profits because we were late by one day with the tool.
The text above is the opinion of the author and should not be taken as legal advice.