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?

Attorneys have target markets; are you a good fit?

Dave, what’s your target market? What type of client chooses you? What type of client do you refer to other attorneys?

The last question is the easiest to answer. For ethical reasons, attorneys may not accept clients facing problems in areas of the law in which they lack competence, cannot become competent with reasonable effort, or do not wish to associate with a competent attorney. Beyond that, it is personal preference and interest.

I am personally interested in legal issues, conflict, and disputes involving businesses, neighborhoods, and churches. My preventative law practice focuses on transactions, contracts, business documents, and business policies, but if a conflict has escalated to the level of a dispute, I move into settlements, negotiations, use of the collaborative process, and mediation. I do not care for family law (even though I help many individuals in this area through the in-take process at Legal Aid), because I respect the sanctity of marriage (“…let no man put asunder… etc.”) even though there are plenty of innocent parties out there. I also don’t care for criminal law or personal injury cases.

So what is my target market? It would have to be the business people who make decisions and wish to be in control of their destinies. It includes entrepreneurs who developed their businesses through their own sweat and do not have funds set aside for litigation. It’s those people who realize that telling the attorney to “sue the bastards” is a no-win situation for the client. It includes the construction industry, the high tech industry, and many shops and operations in between. My clients want to be able to talk to a business person about business problems. They are willing to consider out-of-the-box solutions. They want to do things on their own but sometimes need a sounding board or a little guidance. They are self confident, know they don’t know everything, and know they don’t have to know everything.

Sadly, from the perspective of a seasoned professional, the vast majority is relatively young – more mature individuals, who should have more wisdom, seem to be tainted from having grown up in a litigious society that rewards winning at all costs. Younger folks seem to understand the societal shift toward cooperation and collaboration. Most have grown up with the internet and understand the value of information and time. Yes, there are some of us who remember the tag line, “And that’s the way it is”, but we realize it doesn’t have to be that way.

Am I like most attorneys? Certainly not. According to one survey, I am least like lawyers and most like Operations Managers, Manufacturing Managers, Construction Managers and Information Center Managers. This means I have more in common with problem solving executives in action-driven organizations than I do with individuals earning a living from the litigation process. (Survey results available upon request.)

When hiring legal expertise, be sure you have a good fit. As with other professions, there are competencies and personalities; choose your counselor carefully.

It may be legal, but is it right?