When entering into what may at first seem to be a straightforward contractual relationship or purchase agreement, the question often arises whether to “do-it-yourself” or to engage a lawyer.
This question arises due to the perceived lack of value in engaging a lawyer to draft the Agreement, particularly in light of the legal fees.
Drafting a contract to set out the terms of a transaction and to define the “rules of the game” involves much more than just choosing an appropriate precedent and modifying the names, dates and numbers.
Clearly a well-drafted precedent is superior to starting from scratch or patching something together from documents found on the Internet. However, using precedents adapted by non-professionals will rarely be the optimal way of managing legal or tax risk and regulatory compliance while ensuring your interests are protected. The best contracts are tight, efficient legal documents that recognize and address the deal-specific issues associated with a particular transaction.
As discussed above, a precedent is a starting place, or tool. The tools themselves, however, have far less impact on the outcome of the job than the skill and knowledge of the people employing them. A backhoe is a powerful tool but if one doesn’t know how to use it or when it would be appropriate to use, they may not only fail in getting the job done properly and efficiently, but may end up making an even bigger mess.
Even with access to the appropriate precedent, one must be able to identify the issues to be dealt with, from legal, tax and business perspectives, and then adapt the agreement to adequately address those issues.
Identifying tax and accounting issues should be left to the tax and accounting professionals, as they are expertly trained in identifying those issues and crafting appropriate solutions. Similarly, lawyers are expertly trained in both the law and business and are in the best position to identify the legal issues and to craft appropriate solutions for them. The identification of these issues and the crafting of appropriate solutions to address them is where lawyers add real value to the process.
So why would someone enter into a business relationship and draft the contract themselves? The simple answer is cost. Sourcing a precedent on the internet or even paying a nominal amount to download one is a lot less expensive than engaging a lawyer to draft the agreement. While this is true, there are a few things one must keep in mind; “you get what you pay for” and “caveat emptor“, or “buyer beware”. As Warren Buffett said, “Price is what you pay. Value is what you get.”
Precedents purchased on the internet are often drafted from a generalized perspective in order to maximize the number of sales and without regard to the particular circumstances of your transaction. Moreover, they may be drafted in a different jurisdiction where the laws differ from those of your jurisdiction. Not only are US laws vastly different from Canadian laws, but laws from province-to-province can also differ.
By contrast, when you instruct a lawyer, you are engaging a professional with years of training, experience and expertise. Lawyers are trained to identify the legal issues and craft solutions that are specifically tailored to the circumstances. Lawyers are well versed in applicable legislation and case law and apply that knowledge to craft tight, efficient and practical legal documents that recognize and address the deal-specific issues associated with a particular transaction.
The costs of instructing a lawyer to draw up a commercial contract will vary, depending primarily upon the complexity and scope of the transaction and the efficiency of the lawyer, as well as the lawyer’s standard rate. But in the end, you will receive value for your money because you will receive documentation that serves your purposes and not just paper that appears to do the trick. With a good lawyer, you can be reassured that your contract properly addresses the nuances of the transaction, that main legal risks relating to the transaction have been identified and, where practicable, dealt with or mitigated, and that regulatory compliance issues have been addressed.
In certain cases, such as where the value of the transaction is small, it is possible for the parties to draft their own documents and have a lawyer review and revise as appropriate. Depending on the experience of the client and the complexity of the transaction, this can be a cost-effective use of a lawyer and it is possible to have the best of both worlds. However, it is also possible that your lawyer will review the draft and determine, in your best interests, that it does not adequately address your concerns. In this event, the document may need to be redrafted or the lawyer may have to go back to the drawing board.
There is an abundance of legal information available for free, or at comparatively low cost, on the Internet. At Magellan Law Group, we recognize that knowledge of the law alone is not our competitive advantage. Our up-to-date legal knowledge and extensive precedent library is coupled with a team of skilled professionals with decades of combined experience in crafting custom tailored documents for a wide range of business transactions. We can meet the needs of your business in a cost and time-efficient manner.
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