Business litigation can sometimes be the result of contract disputes or unethical competition. Companies can take legal action against former employees, business partners who exited the organization, competitors, service providers, vendors and even customers or clients.
Business leaders can file lawsuits to address issues ranging from the disclosure of trade secrets to defamatory statements made by competitors. During business litigation, there are many forms of relief potentially available. Sometimes, the goal is to enforce a contract. In some cases, preventing continued misconduct is a primary concern.
Other times, there may simply be a desire to limit the economic consequences of another party’s bad behavior. Plaintiffs pursuing business litigation often request compensation to make up for actual, verifiable economic losses. Other times, plaintiffs may choose to request liquidated damages to defray losses and demand accountability from the other party.
What are liquidated damages?
Actual damages are straightforward, as they involve provable, specific losses. Liquidated damages involve estimating the financial value of concerns that may not have a clear economic impact. They often relate to intangible losses caused by misconduct or contract breaches.
Typically, business leaders preparing for litigation need support when determining how much to request in liquidated damages. The goal is to arrive at an amount that is fair and reasonable. Liquidated damages should not be punitive or intended to punish the other party.
For example, in a scenario involving a breach of a non-disclosure agreement that results in competitors or the public learning a company’s trade secrets, estimating the impact on current and future revenue can be a challenge. Looking at historical sales and the way that the leak impacted the company’s reputation or the conduct of competitors can help business leaders estimate an appropriate amount of liquidated damages to request.
In scenarios where financial compensation is the best solution for a damaging situation, working with a legal professional to initiate a lawsuit and request a specific amount in liquidated damages could be a viable strategy. A request for liquidated damages is sometimes the most effective solution to a business dispute that has cost an organization money or is likely to have a major economic impact in the future.
Learning more about the possible solutions available during business litigation may help leaders explore their options.