Shortcuts in Business Contracts: Penny Wise and Pound Foolish

In today’s uncertain economy, marginal increases in revenue or minor reductions in expenses can noticeably improve the bottom line of a small business. However, many small business owners in Northern Virginia attempt to cut costs by managing their commercial contract drafting or negotiations without an attorney, an ill-advised attempt at cost-cutting which often backfires.

Whether negotiating a commercial lease, a promissory note, a distribution agreement, an asset purchase agreement, or a joint venture agreement, consulting with an attorney early in the process will likely save you money and help avoid headaches both during the negotiation process and during the term of the agreement.

Many small business owners or entrepreneurs are tempted by the thousands of easily obtainable agreements online, and in fact, many of these agreements are indeed professionally and expertly drafted—but for different parties dealing with different and unique circumstances, often in a different state or legal jurisdiction. Since the addition or omission of a single word or sentence can often radically change the meaning or enforceability of an agreement, attempting to modify and utilize these agreements without professional assistance can end badly.

When it comes to business agreements, business owners without legal training don’t know what they don’t know.

The attorneys at PJI Law have seen countless commercial agreements that omit critical provisions which should always be included, as well as agreements made by individuals when the parties should be corporate entities, or agreements made by corporate entities which have been dissolved or have never existed to begin with. We often find ourselves helping clients who had poorly drafted agreement resolve contract disputes at a far higher cost than the small upfront investment in legal guidance that would have likely prevented such problems from arising.

When both parties are represented by counsel and the attorneys drafting the agreement have a clear understanding of their clients’ desires and concerns, the process can become streamlined and efficient. An effective commercial contract can save even a very small business tens – or even hundreds – of thousands of dollars by helping to reduce the likelihood of problems arising and minimizing the damage in the event that problems do arise – whether from breaches, negligence, liability, or indemnification issues.

Finding ways to cut costs in your small business is absolutely critical for success and survival, but business owners should think twice before trying to save money by taking shortcuts with their commercial contracts. No one wants to reach a point where they realize they were penny wise and pound foolish.

10 Ways to Reduce Your Legal Fees

There are times when you simply cannot avoid investing in an attorney to assist you with your legal matter. But this does not mean that there aren’t many steps you can take to shrink your legal bills in cases billed on an hourly basis. In fact, one reason law firms use hourly billing for certain types of cases is that they don’t know how efficient and cooperative of a client you will be, and as a consequence, how much time they have to dedicate to your case. So then, what can you do to receive equally good service while keeping your attorney’s fees low?

1. Respond to Your Lawyer Promptly. Your lawyer can work much more efficiently when he has the answers he needs, without needing to continue following up with you, and without needing to spend time requesting extensions. Further, your prompt “Ok” on a court document could mean the difference between the document being sent for filing by mail ahead of time, rather than by the more expensive same-day courier.

2. Keep Your Lawyer Updated. Nothing wastes your lawyer’s time more than drafting a document or preparing for a hearing based on a certain set of facts, only to find out at the last minute about an event or update that you have known about for some time and that changes your lawyer’s course of action. Your lawyer should find out about relevant new information as soon as possible, and should hear it from you, rather than from opposing counsel.

3. Understand Your Lawyer’s Billable Hours. Many law firms bill in increments of 15 minutes, meaning that even a 6-minute phone call could be billed as 0.25 of an hour (we at PJI Law believe this is excessive, so we bill in increments of 6 minutes, or 0.1 of an hour – and we don’t bill for things like “reviewing voice messages”). Understanding how your lawyer bills, and what is considered as billable, will help you better plan your communication and actions during your case.

There are many ways for clients to reduce a lawyer’s fees.

4. Communicate with Staff when Possible. If you need to contact the law firm regarding a non-legal matter, such as getting a copy of a certain document, reach out to a legal assistant or secretary, rather than to the lawyer. Depending on the service, some firms bill for an assistant’s time and some don’t, but either way it will be far more cost-effective than using your lawyer’s time when you don’t really need it.

5. Deliver All Documents Upfront and in an Organized Manner. As soon as you sign your agreement with the law firm, deliver all relevant documents to your lawyer immediately, and supplement them as you receive new updated documents even if you haven’t yet been specifically asked for them. Otherwise, your lawyer’s work will be interrupted if he is missing certain documents, and he will inevitably contact you about them later as the need arises. Further, the more organized your documents are (grouped, tabbed, labeled, etc.), the more efficiently your lawyer can work with them.

6. Do Some of the Work Yourself. In many cases, there is at least some work that you can do yourself. This includes gathering documents, communicating with certain third parties, preparing responses to what are called “discovery” requests, and so on. The more you are able to do, the less your lawyer has to do. But this one comes with a big caution sign: Always coordinate with your lawyer before trying to do something yourself, otherwise you could hurt your case.

7. Consolidate and Organize Your Emails. If your lawyer asks you for certain electronic documents that are sitting in a dozen different emails in your Inbox, do not simply forward to him each individual email with its attachment. Instead, download all of the attachments to your computer, and then send them to your lawyer in a single email (if you do not take the time to organize them, he will have to). And if your lawyer sends you an email with a numbered list of questions, answer them in a numbered list, maybe even below each question. Do not give your answers in one long paragraph that will take longer to parse.

8. Avoid Venting to Your Lawyer. Venting is sometimes inevitable, and is certainly understandable in many stressful situations and disputes, such as in emotional divorce and child custody cases. But a lawyer has a limited number of hours per day, and even if he genuinely sympathizes with you (and he probably does), he has to bill for the time he is using although the time spent is not doing much to help your legal case. In most cases you will find that a good friend, a spiritual leader, or a therapist not only makes more sense financially, but is also better equipped to discuss the emotional aspects of your situation with you.

9. Ask Questions as Soon as You Have Them. Sometimes you might be too embarrassed to ask a question, or for any other reason might avoid telling your lawyer that you don’t understand a certain aspect of your case. But your lawyer has no way of knowing this, and will proceed on the assumption that you understand the plan. Asking questions as soon as they arise will be far more cost-effective than asking “around” the question for weeks and months, or letting the case go in a direction you may not fully understand.

10. Use Your Phone Calls Efficiently. If you can send a brief email update or response to your lawyer, there is no need to initiate a phone call, which will likely be more time-consuming for the lawyer than reading your email. And when on the phone, don’t force your lawyer to repeat a question because you answered on a tangent the first time. When your lawyer is asking you specific questions that don’t seem to deal directly with your biggest frustration, answer the questions – your lawyer knows the issues and wouldn’t have asked the specific questions if he didn’t a good reason to do so.

Of course, the one thing that could save you the most in legal fees is the settlement of your case on acceptable terms, if possible. The earlier the settlement, the more you stand to save in billable hours. With that said, it was not included in the list above because settlement is an immense, substantive step that you will necessarily discuss with your lawyer as a possibility, and that will vary wildly from case to case.

Our attorneys here at PJI Law are always happy to answer any questions our clients have about how to reduce legal fees on a case-by-case basis. We hope that this list can serve as a good start!