The most likely scenario in which you, a small business owner, might have legal issues is by being involved in a lawsuit, either as the plaintiff (the person bringing the suit) or the defendant (the person being sued).

There are typically two reasons why you might be involved in a lawsuit: contractual disputes, and torts.

Remember, civil law deals with disputes between individuals over their legal obligations to one another. Often, the obligations in dispute stem from contractual disagreements, whereby one party is accused of breaching their contractual agreement with the other party.

Put simply, if two people have a legal agreement between them (a contract), and one of them breaks the contract, the other party has the right to sue them to remedy the situation. They could sue in order to get the court to force the other party to fulfill their contractual obligation. Or, they might sue for damages, which I’ll explain below.

Besides being sued for a contractual breach, you might also be sued (or have cause to sue someone else) over what is known as a tort. 

According to Wikipedia, a tort “is a civil wrong that unfairly causes someone else to suffer loss or harm resulting in legal liability for the person who commits the tortious act.”

Take note of those words, “loss or harm,” because proving loss or harm is often the key to whether or not a plaintiff will prevail in court. Also note that tort law is closely related to contract law, since most breaches of contract would also qualify as tortious acts. 

There are four components of a tort that must be present in order for a plaintiff to successfully sue for damages (meaning, monetary compensation). 

These are:

There are three categories of torts:

1. negligence
   
2. strict liability (product liability)
   
3. and intentional torts
   

Negligence is when a tortfeasor (the person committing the tortious act) does not take sufficient care in fulfilling a duty owed to another party. This is a very common reason for someone to sue a business owner. For example, if a student was injured in class while you were in the office answering the phone, that student could easily make a case that you were negligent in your duty to protect them from harm.

Strict liability is a bit different than negligence, because it covers certain legal situations in which the plaintiff does not have to prove fault or negligence on the part of the defendant (or even intention to cause harm). The plaintiff only has to prove that the injury or loss occurred. 

Product liability is one area in which the law imposes strict liability on the manufacturer and seller. So, if you sell a defective martial arts training product to a student, and they are injured while using the product, you might be sued by that student under the legal principle of strict liability. And under some product liability laws, it wouldn’t matter that the defendant might have used that product improperly--they could still sue you for their injury.

Be aware that product liability laws vary from jurisdiction to jurisdiction. In the U.S., some states have laws that favor the injured party, while other states have laws that favor sellers and manufacturers. If you’re selling martial arts equipment in your school, it might be prudent to become familiar with product liability laws in your area.

Intentional torts are generally the realm of the foolhardy, but martial art school owners should pay close attention to this classification of torts. Intentional torts include, but are not limited to: assault and battery, slander and libel, and infliction of emotional distress. Each of these acts are conceivably something that could happen in the course of running a martial art school.

For example, say someone comes in your school off the street and challenges you to a sparring match. If you accept their challenge and injure them, they could easily file criminal charges against you for assault and battery, and then later sue you for the same. 

As well, a school owner who publicly trashes their competitors verbally could be sued for defamation and slander, and if they do so in writing (on a social media account or blog) they could be sued for libel.

And finally, infliction of emotional distress is a trickier thing to prove, but it is not uncommon for business owners to be sued for such. For example, if you lose your cool with a difficult customer and use excessively foul language, you could be sued for infliction of emotional distress.

Of course, at this point you are saying to yourself that you would never commit any of the above acts against a student. However, there is another legal concept related to tort law that business owners and employers must be aware of; that is, the law of agency.

Simply put, the law of agency deals with persons who commit acts while acting as an agent of another. Your employees are your agents, and so are your student volunteers. So, under the law of agency you are liable when any person who is acting as an agent of your school commits a tort against another person.

Meaning, you can be sued for the actions of your employees and volunteers, if they commit a tortious act while they are on duty. For this reason, you have to be very careful about who you hire and how you train them.

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I think that pretty much covers civil legal issues in sufficient detail to allow you to understand your liability as a school owner. Tomorrow, I’ll explain various strategies you can use to protect yourself against civil lawsuits.