Dealing with a Bad Customer; Litigate or Cut Your Losses?
Dealing with a Bad Customer; Litigate or Cut Your Losses?
November 21, 2014

Bad customers are a reality in any business.

Attorney Sheryl Hunter explains “these are the customers who do not pay you, who make unreasonable demands or unwarranted complaints, or who threaten to defame you and your company if you do not do as they ask.”  Bad customers can cause minor financial loss and stress, or even bring a business to its knees depending on the magnitude of the problem.

If you are dealing with a bad customer, there are typically two distinct ways to handle the situation:  litigate or cut your losses.  Here is a real life situation taken from a post on the legal advice website Avvo.com to which Hunter Business Law attorney Adam Hersh responded.

The Bad Customer Scenario

A professional wedding planner was hired by a bride to secured a specific venue and sent out invitations.  The bride, after not returning the planner’s calls for weeks, demanded a new venue and new invitations and expected to not have to pay for any of the services or expenses for the original work already performed.

Option A: Litigate

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The wedding planner can hire a lawyer and fight for compensation for her services and she would likely prevail in court.

Unless there was a clause in a written contract stating that the prevailing party be awarded its attorney’s fees and costs in addition to money damages in the event of a breach, the planner could spend more money on legal fees and costs than the payment for her services.

A judgment in court does not mean the money will be collected from the bride, at least not without incurring more fees and costs to collect.

The time spent in court is taken away from procuring new business and earning from good customers that spread positive words about the wedding planner to friends and family.

In today’s Internet world, business owners also have to consider that disputes with bad customers can leave a permanent mark on a business’ reputation.  If the disgruntled customer voices her disdain on websites like Yelp and RipOffReport where there is little to no recourse for a defamed business owner.

Option B: Cut Your Losses

As bad as the customer’s behavior may be, the business-minded approach in the scenario would be to terminate the contract with the bride and move on.  This would constitute a loss of a few thousand dollars for a few weeks of uncompensated work, but this would be the end of the draining relationship with a bad customer that will likely go from bad to worse.

[If you’re thinking that bridezilla may not accept an end of the contract even if no payment is demanded, you are correct that bad customers can get worse and we would be back to Option A.]

If the wedding planner is going to settle for no payment and walk away, she should require that the bride sign an agreement stating she will not bring any claims or disparage against the wedding planner or post any reviews that could harm the reputation of the business.

Why Should a Business Let Bad Customers Get Away with Being Bad?

It is a personal decision whether to litigate or let it go.  Many business owners who have been wronged pursue litigation out of principal, refusing to be taken advantage of or unwilling to take a financial loss.  This is understandable, but is often not the best decision for the business.

At the end of the litigation the business owner may find herself deeply regretting the decision to seek justice.  The decision should factor in the extent of the financial loss, the strength of the company’s case, the influence of the customer in the company’s market, whether fees and costs are recoverable, and the cost to litigate.

Which Option is Best?

A business attorney that thinks like a business person, has litigation experience, and understands your legal rights as well as the realities of litigation can help you reach the best decision for your business.  If you are dealing with a bad customer, call Hunter Business Law today to figure out what to do in your circumstances.

By Jake Van Loon and Sheryl Hunter

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