Updated: Apr 19
Litigation, in layman’s terms, means the process of taking legal actions.
It usually begins with a dispute that ends with a lawsuit.
The opposite spectrum of litigation is alternative dispute resolutions.
So, when businesses or corporations are involved in a dispute, the lawsuit is known as commercial litigation.
If you are the type to be prepared by arming yourself with knowledge and options, then you’ve come to the right place.
In this article, we will talk about the common disputes in commercial litigations.
Types of Disputes in Commercial Litigations
1. Breach of Contract
Typically a breach of contract happens between your company and other businesses.
However, it can also happen internally between an employee and employer—typically known as an employment contract dispute.
A breach of contract litigation usually resolves with an award of damages.
The compensation for damages may include
loss or damages caused by the breach of contract
failure to discharge obligations resembling those created by the contract
breach of contract where a penalty is stipulated upfront
The claimant may also recover damages for the amount of money lost resulted from the breach of contract.
Sometimes, it is unfortunate that we may always encounter businesses that do not perform their obligation.
However, we can take certain precautions to reduce the likeliness of that happening.
Set a proper assessment process to find reputable vendors and suppliers
Integrate a suitable preferred vendor list system for all your business functions
Ensure all obligations, service level agreements, and resolutions are stated clearly in the contract before work starts.
2. Wrongful Termination
As mentioned in our legal mistakes by startups article previously, termination of employees requires a proper procedure.
Also, in Malaysia, employers are not allowed to hire and fire at will. Therefore, all companies must have a proper exit process for termination.
Failing to do so may lead to the lawsuit of wrongful termination by the employee.
Set up a proper system and termination process that everyone adheres to
Ensure your managers or leaders are familiar with the Employment Act 1955, particularly the HR department and hiring managers
3. Partnership and Shareholder Disputes
Usually arise when majority owners unjustly obstruct minority owners from receiving financial returns.
Minority owners may not have control over the business.
But, they can bring a lawsuit or seek an award for damages for improper or oppressive conduct.
Ensure fair treatment to all owners
Define financial returns for each owner upfront
Formalise duties and responsibilities of each party through contracts
4. Unfair Competition Claim
Under the Malaysian Competition Act 2010, companies in Malaysia
Are not allowed to do anti-competitive agreements. This means any type of deals—horizontal or vertical—that has the object or effect that significantly prevent, restrict or distort competition in any market for goods and services.
Are not to conduct business activities that amount to an abuse of a dominant position in any market for goods or services. For example, a standard drug company that monopolises the industry hike up the price by 200%.
The Malaysia Competition Commission may potentially investigate you if you advertently or inadvertently
share price information that may facilitate price-fixing, directly or indirectly
share non-price information with competitors of each other’s strategies, standards, and new technology that may improve competition in the market (assessments are done base on cases)
restrict competitors from advertising
standardise your agreement that limits or controls the production, market outlets or market access, technical or technological development, or investment of companies
Always play fair in the field of your business.
Cultivate a healthy competition culture within your organisation to ensure it is reflected in all your employees’ business activities
If you ever suspected unfair competition, be vigilant in not getting involved or reporting to the proper authority.
5. Consumer Fraud and Consumer Protection Issues
The Malaysian Consumer Protection Act of 1999 is enacted to protect consumers.
For businesses selling products, you may want to know that some of the violations include the following if
you offer gifts, prizes, or other free items without the intention of providing
the goods you sold are not fit for all the purposes where such goods are commonly supplied, not acceptable in appearance and finish, not durable, not safe, or not free from minor defects, and more.
your actual products are in match with the sample provided
you do not honour the express guarantee offered to your customers
you ignore the customers who have a right to reject your product on grounds for rejection
You may check out the official portal of the Attorney General’s Chamber of Malaysia for more info.
Ensure quality, safety, and assurance are in your product development plan.
Walk the talk always—be sure to do what you promise, be trustworthy.
Protect yourself from unknowingly violating the law by learning or getting legal help
6. Interfere With the Contract or Business Relationships
Interfering with competitors’ contractual or business relationships is also known as an economic tort.
Typically happens in the industrial dispute or unfair competition dispute, similar to anti-competition as mentioned above.
If this happens to you, you have a right to seek resolutions too.
If you ever suspect a competitor is torting your contract with a business partner or potential business, then you may want to be on the lookout for possible evidence that can be used in court.
Some are listed below.
You have a valid relationship in contract or business expectancy like LOI (letter of interest)
The competitor knows your relationship with the business partner or prospect.
There is proof that the competitor intentionally coerced the parties to terminate the business relationship, breach a contract or withhold a valid business expectancy.
Their interference resulted in damages to your business.
7. Intellectual property dispute
Some common intellectual property infringement may include
Create or use a logo to mislead consumers to think they are purchasing the same original product
Making copies of movies, musical recordings, and other media, then distribute them for profits without copyright owner’s consent
Use the logo of an effect on another product of the same nature
Manufacture a patented item following the specifications without licensing from the patent owner
Protect all your intellectual property accordingly
Ensure your employees do not use patented or copyrighted products, technology, or design
Running a business successfully means unique, consequential, or useful products that serve the market needs.
Your business needs to serve the market and compete with the competition fairly. And coming out on top through fairness means an all sweeter win.
However, you may also fall into anti-competitive wrongdoings unknowingly.
Therefore, business owners and leaders need to strengthen their knowledge of legalities.
Otherwise, having legal counsel or advisor for your business may be a better option if you are unsure.
Note: This article does not constitute legal advice to any specific case. The facts and circumstances of each case will differ and, therefore, will require specific legal advice. Feel free to contact us for complimentary legal consultation.