What does it cost a business to have its contracts reviewed, redlined, and negotiated?

An “average” sale, purchase, rental, or lease contract takes about an hour or two to thoroughly read and spot issues; a one pager takes less and a multi-document takes more.  Once the attorney is familiar with the subject matter and intent of the parties, the redlining begins.  If the original document was drafted from a one-sided perspective where all of the risk is shifted from the offering party, the edits will be significant.  If the document is generally balanced (where it is a matter of watching out for the occasional slips into greed and selfishness) only a few edits may be necessary. 

Attorneys are taught to “zealously represent their clients.”  To most, this means attempting to shift all the risk, and “while I’m at it, why not slip a few things past the other side.”  The typical response is to take a position at the other extreme with a goal of meeting in the middle.  The redlining process attempts to tip the scales and to find all the “gotchas”.

A seasoned, business-oriented attorney will recognize that client representation means doing business, not negotiating, disputing, and litigating.  He will represent your interests, rather than your position, and offer a balanced agreement to begin with.  In most cases, the other side quickly agrees to consummate the deal because it is such a welcome relief from the many terrible contracts being pushed on businesses.  As an attorney representing the receiving party, a balanced response to a one-sided offer is usually met with the same welcome relief.

Given the range of balance or lack thereof in the offered document, redlining (marking words for deletion and inserting new language) may take two to three hours. 

After the review and redlining, all that information must be communicated to the client so he knows where he stands.  The client needs to make business decisions on which risks to accept and which provisions to negotiate.  (Notice that we are not talking about rejecting the offer.  The business folks want to do business and it is the attorney’s job to facilitate the transaction.)  Communications may take another hour or so depending upon how much detail the client needs.

In some cases I have personally read, redlined, and responded to clients in an hour, but the average business contract seems to take about three to four hours for a complete review.  Add in a review of negotiated terms, and the average attorney time may be five or six hours from start to finish.

Again, it all depends on the document and the parties.  The time invested by the attorney in the review and editing can vary significantly.

Why go through all that?  Why pay an attorney to read your contracts?  Because, it is much less expensive to avoid problems than it is to fix them.  You say, “But this is going to cost me a small fortune!”  Not if you have a working relationship with your attorney.  An experienced business attorney in solo practice in Dallas, TX typically charges $300 to $350 per hour.  However, if he can depend on you for repeat business, he will likely discount the fee by as much as fifty percent.  Give him the equivalent business of full time in-house work and you can probably hire him for a third of his normal hourly fee.

Bottom line on what it costs?  As any good attorney will tell you, “It depends.”  It depends on all the facts.  The fees will vary.  If you want a fixed fee for a contract review you can hire in-house counsel to conduct all of your reviews for a salary.  If you insist on a flat fee for a single contract review, expect to get canned templates and be content with marginal advice.

Was the original question answered to your complete satisfaction?  Probably not, but at least you now have a few reference points from a business oriented attorney with more than thirty years of experience.

It may be legal, but is it right?

Why hire an attorney who has a business background?

If you run a business, you want your entire team aligned behind your efforts.  Obviously, the Sales and Marketing personnel are interested in revenue and number of units sold, but does your support staff understand the sales process as well as fixed, variable, short term, and long term costs? 

Your legal counsel should be as interested in business as you are.  Counsel with a background in business can relate to your problems and offer solutions that make sense in your environment.  The legal experience provides the boundaries while the business experience provides the innovation and practical understanding.  In-house attorneys handling transactions need to be even-keeled, patient, detail-oriented individuals who can catch potential problems to save your business from disaster.  To do that, your counsel needs the breadth of knowledge from years of exposure outside of law schools, law firms, and legal departments.  To be a true team member, the individual you hire for this role should be comfortable interacting with all levels within the company and should be a potential resource to be tapped should a need occur on the business side.

If your legal counsel cannot relate to the truck drivers, the work crews, the sales reps, the office staff, the accounting team, the executives, and the board members, you may wish to consider a change.  Consider bringing in a well-rounded individual to represent your interests.

It may be legal, but is it right?

A Conversation with a Litigator

An interesting conversation occurred between a Collaborative Practitioner and a Litigator after the Collaborative Law Section meeting at the local Bar Association. The Litigator made a number of accusations and assertions concerning the use of the Collaborative Process:

1) “The practice of Collaborative Law attracts lawyers who can’t find their way around the courthouse and who don’t know how to litigate.”

2) “If you look at the attorneys beginning to practice Collaborative Law, you’ll find they are generally young or have a business background and have not been Litigators.”

3) “As a Litigator, I can win more cases and obtain bigger settlements than the Collaborative Practitioners can achieve.”

4) “The Collaborative Practitioners are running up bills and using all the assets so there is nothing left when they finally turn the matter over to the Litigator.”

Sadly, this seasoned attorney stated that he attended the meeting just to see if he could network with Collaborative Law Practitioners for referrals of those cases where the parties opt out of the Collaborative Process. He was not interested in understanding the process or learning enough to be able to offer the Collaborative Process as an alternative to Litigation to his clients.

A couple of us gently explained the future of the practice of law (see “The New Lawyer: How Settlement Is Transforming the Practice of Law” by Julie Macfarlane, for a study of the progression of the profession) and the normal development of a society from lawlessness through a period of “law” to collaboration.

Lawyers have been hired to be the warriors for people in conflict so they no longer have to physically fight or kill each other over a dispute. Although they are sometimes considered to be counselors, many lawyers have forgotten this role or view it only as part of the preparation for “war” in the courtroom. The New Lawyer is a “conflict management advocate” for his client and avoids the infliction of emotional and financial distress whenever possible.

In response to the assertions, we stated:

1) Collaborative Lawyers are no more or less competent than those making a living in the courthouse. We have merely chosen to put the interests of the clients ahead of our personal interests. With greater than 90% all cases being settled before trial, does it make sense to conduct trial preparation rather than expending that energy in resolving the dispute in a timely manner? Litigators enjoy the fight and the spotlight – nothing wrong with that. Collaborative Practitioners enjoy problem resolution, maintaining on-going relationships between parties, and allowing the parties to work on a solution that may not be available through the courts.

2) Many attorneys beginning to practice Collaborative Law are generally young or have a business background and have not been Litigators. However, many entering the practice are middle aged or older, and may have been practicing law all their lives. Certainly, those under 35 have grown up with the web, instant access to information, sharing of ideas, working in team environments, and quickly moving beyond conflicts. Why would it surprise anyone that young law school graduates are disillusioned with the current judicial system’s method of dispute resolution? Those attorneys who have been in management positions outside of a law firm no doubt are better positioned to assist their business clients in addressing the issues and developing solutions. Is it surprising that they find the structure of the Collaborative Process appealing? Finally, of the members of the Section at the meeting, the vast majority have been Litigators – many for more than two or three decades. Perhaps they have now found something they could not provide to their clients in all those years of doing battle.

3) As a Litigator, you are concerned about winning and winning big. In the Collaborative Process, the focus shifts from the attorneys in the spotlight to the clients working on resolving their differences by expressing their interests rather than their positions. Why wouldn’t the client want to be involved in the resolution process and keep the dispute out of the public eye? Should the use of the legal system be about the lawyer or about the client?

4) The Collaborative Practitioners use assets to resolve disputes. If the parties had been able to resolve the issues without assistance, they would have done so and avoided all expenses. However, most Collaborative cases are resolved faster and at less expense (both financially and emotionally) than cases taken through the courts. If a party opts out of the process, additional assets will need to be used to go through the litigation process, but that is a known risk; just as an appeal from a trial is a risk in the litigation process. Doesn’t it make more sense to try to resolve the dispute through an agreed upon process with a controlled outcome where the parties may maintain complete privacy? The Collaborative Process, done correctly, does take time and hard work and professional fees will add up; but consider the alternative.

It may be legal, but is it right?