Stand your ground

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I’ve been practising law for some time now and one of the things that I have learnt, which was incredibly difficult to learn, is to stand one’s ground. I can now firmly stand my ground with YOU (the client) and the senior lawyers I work under. Why do you care? Well, simply because my confidence as a lawyer saves you money (yup, you know that paper we all want…). There are two scenarios which have played a recurring role in my career to date and these scenarios have taught me to stand my ground. Let’s take a look at them and then I’ll tell you how you can help your lawyers get to the level of confidence I have now (smug face) which should save you money.

Scenario 1 – A client desperately wants to do something that cannot be done but a dedicated lawyer, knowing that it cannot be done, still struggles to find a way. The client wants and the lawyer strives to give BUT it just isn’t possible. This is a rubbish scenario for everyone because the lawyer looks for the source of a myth whilst the client pays unnecessary costs to gain nothing.

Scenario 2 – A junior lawyer (they do all the ground work by the way) doesn’t think that a certain course should be taken but unfortunately the senior lawyer, eager to please the client and incur more fees (money, money money), doesn’t listen. A longer more difficult route is taken. As in scenario 1, the client pays unnecessary costs but to gain something it could have gained more easily and more cheaply.

I used to hate these situations. A junior lawyer pushing back against an experienced, Tom Ford wearing senior lawyer or a great lawyer too client whipped to be frank and say “sorry, this won’t work”. The disappointing feeling I experienced in these scenarios taught me to stand my ground in my profession. I will never lead you on a wild goose chase; if it can’t be done or it can only be done at a cost detrimental to your business, I will tell you and that will be it. If I’m working for a senior lawyer who is putting pressure on me to do A or B when I think C is best, I will throw all my toys out of my pram to get C, only giving up when I have been absolutely convinced that A or B is better. Sounds good right? Here’s how you can help to make sure that your legal team adopts this cost saving mentality…Ask to hear the best and the worst from your legal team AND reassure them that you’re READY to hear the worst. Also, direct your emails at the WHOLE legal team, not just the “front of house” senior lawyers, but the juniors too (those silent names that are cc’ed into every email to make sure that they pick up the work). In doing this you let the senior lawyers know that you value EVERYONE in the team and that at any given time you may ask for the junior’s opinion.

Deploy these tips and see the difference in your service. You should hopefully spend less time chasing dead ends and more time progressing to where you want to be.

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Be smart but don’t cheat…

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There is a reason why mega successful businesses spend thousands, sometimes millions of pounds/dollars on legal advice. I cannot tell you the number of times that I have almost cried because a client has brought me a problem that could have easily been avoided IF legal advice had been sought in the first place. In the long term, getting proper legal advice could save you so much MONEY and isn’t that what it’s all about – MONEY? You know that saying, what’s worth doing at all is worth doing well…it’s said for a reason! I don’t feel good billing you for my time when it’s for an issue that really shouldn’t have ever become an issue!

Think of it this way, when you have a tooth ache you go to a dentist -you don’t pull out the tooth yourself. When you feel sick you go to a doctor you don’t diagnose yourself. SO, if you need a contract drafted, guess what, you DON’T do it yourself. You go to your lawyer! You should be focusing all your energy into your product/service/idea not struggling to draft a 30 page contract or represent yourself at Court.

So what am I saying? I’m saying be smart BUT don’t cheat.

I am a lawyer and it took me 6 years of training to qualify to be one (a 3 year degree, a 1 year professional practice qualification and a 2 year training contract at an international law firm in the City). You cannot read this blog and become a lawyer BUT you CAN read this blog and become legally smart so that when you seek proper legal advice you are not doing so blindly. You are firing out questions and demanding the best service possible!

It’s quite simple, do things properly at the outset and you will reap the rewards.

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Cut it out: the beauty of a severance clause.

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It is said that the law is the fabric of society, without it we would have nothing but unruly human beasts roaming the earth’s surface. However in business, sometimes the law actually gets in the way. Yes you read that right. English law believes in freedom of contract, however there is always a risk that a contractual clause may be invalid or illegal – e.g. it offends against public policy or competition law – often this is the case with non-compete clauses and restrictive covenants (clauses that tell a party what they cannot do). This is why clever lawyers make use of “severance clauses” when drafting contracts.

A severance clause (or severability clause) tries to mitigate the damage that may be caused by the interference of the law in a contract. How does it do this? It ensures that a contract will continue to be enforceable even if one of its terms is found to be illegal, invalid or unenforceable. Severance clauses assist in helping a contract to SURVIVE. Pretty cool right? For example, if a contract for the sale and purchase of various vegetables is suddenly subject to a new law stating that no one can sell or purchase carrots (ridiculous but it’s an example), why should the contract die just because the sale and purchase of carrots is illegal? A severance clause would carve out or sever the ILLEGAL part of the contract and require the parties to continue to perform the remaining LEGAL part of the contract i.e. the selling and purchasing of courgettes (zucchinis), potatoes, aubergines (eggplants), peas and so forth. In other words, business shouldn’t stop if it doesn’t have to stop. This is why a severance clause is simply beautiful.

Let’s look at an example of a basic severance clause:

If a Clause of this Agreement is determined by any court or other competent authority to be unlawful and/or unenforceable, the other Clauses of this Agreement will continue in effect.

The above clause severs the illegal part of the contract. BETTER versions of a severance clause will try to sever as little of the illegal clause as possible. Here is an example:

If any unlawful and/or unenforceable Clause would be lawful or enforceable if part of it were deleted, that part will be deemed to be deleted, and the rest of the Clause will continue in effect (unless that would contradict the clear intention of the parties, in which case the entirety of the relevant Clause will be deemed to be deleted).

Even BETTER severance clauses will give the parties the option to modify or correct the would be severed clause, in order to make it legal. Here is an example:

If any provision or part-provision of this agreement is or becomes invalid, illegal or unenforceable, it shall be deemed modified to the minimum extent necessary to make it valid, legal and enforceable. If such modification is not possible, the relevant provision or part-provision shall be deemed deleted. Any modification to or deletion of a provision or part-provision under this clause shall not affect the validity and enforceability of the rest of this agreement.

If  any provision or part-provision of this agreement is invalid, illegal or unenforceable, the parties shall negotiate in good faith to amend such provision so that, as amended, it is legal, valid and enforceable, and, to the greatest extent possible, achieves the intended commercial result of the original provision.

Severance clauses are usually included in any contract as a boilerplate (standard) clause – however don’t take that for granted. Go check your contracts and flag this magical clause with your lawyer. Get your lawyer to advise you – could your severance clause be better? Do not rely/use the examples in this post, they are EXAMPLES. Your lawyer will draft a robust severance clause tailored to YOU.

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“Hey Joe”….How to… get your point across in negotiation.

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Ok, so I didn’t want to give away this secret BUT this blog is about helping you in the legal world, so I can’t keep this from you! I’m about to tell you the secret of the best lawyers for how to really get your point across at the negotiation table. Now, when I tell you, some of you may laugh and say “but of course!” or “durr, that’s so obvious” but it is amazing how many lawyers just don’t do this and so never really get their client’s points across. You can take this tip and apply it to your day to day negotiation.

The best lawyers start formally but as soon as things heat up, they recognise that it’s time to drop the barriers and get right up and close to the people on the other side of the table. How do they do this? It’s really simple and I feel guilty that I’ve built this up so much but hey, I want you to read this! The best lawyers say “Hey Joe”,  “Hey Sarah”, “Hey Mick”… they switch to a first name basis. Lawyers are renowned for being stuffy and posher than the Queen of England, but the really good ones know that sealing the deal is about getting through to the opposition on a personal level, and the quickest way to do this is to use their name. Not from the outset – we start off with “Our client  is concerned about” or “Our position is that” – but as soon as we see that flicker of mutual understanding we transition to “look Phil, between you and I, they [not client] just want to get this done and they think that [name of company that you are negotiating with] is the best to do it”.

I remember some time ago, it was the run up to Christmas and work was crazy. I was representing a client in a claim against a very stubborn defendant. They didn’t want to agree a Court extension which meant that we would all be working over the Christmas holidays. My client was furious with how unreasonable they were being. Tired of sending letters by email to and fro, I simply picked up the phone and called the Defendant’s lawyer. The conversation went as follows:

Me: Oh hi Barry this is Emma here, how are you doing?

Barry: Fine thanks, crazily busy as I’m sure you are too.

Me: Yup, crazily busy, which leads me to the matter of this Court extension on X case.

Barry: Oh yes, my client’s position is very clear on that.

Me: Well Barry, off the record, Joe Bloggs LTD, doesn’t want the extension to secretly build an even stronger claim, they just want a break this Christmas! They literally want to go offline for at least a week. If we don’t agree this extension, we’ll all be working unnecessarily at one of the best times of the year.  I don’t know about you but I’d quite like to catch up on Suits.

Barry: [laughter]. Yes, I know what you mean, well I’ll see what I can do and get back to you.

Me: That’s great, thanks Barry and good luck with the last minute shopping.

Barry: How did you know? [laughter]

End of call

We ended up agreeing the Court extension and it was a sweet Christmas break! There is power in just getting a little personal and a little real! Try it!

Ps. I have not used real names in this post.

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3 things you should be happy about before you hire a lawyer.

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Hiring a lawyer is a big, BIG deal. As I’ve said before, a great lawyer will facilitate your business and help you get to the next level, a bad lawyer will leave you feeling frustrated, perplexed and out of pocket. So when you decide to give some of your hard earned profits to a lawyer, you need to make sure that you get it right. Here are 3 things you should satisfy yourself of before you sign that retainer!

  1. Do you believe them? Lawyers are great talkers AND charmers. As soon as you tell them what you need help with, they will tell you that that specific thing is their particular expertise (sorry fellow lawyers). I’ve seen it done many times. A prospective client asks for help contracting with aliens on Mars and suddenly that lawyer has not only done some similar work in the past, they’ve been to Mars and had dinner with those very aliens! Don’t get me wrong, lawyers are excellent at coming up to speed on any issue, even if they’ve only remotely come across it before however you should still make them prove themselves! So the questions you have to ask are why can they do the job and will they do the job? The answers will help you to decide whether to believe them. WHY – ask for their qualifications and their actual experience. Ask them questions about your business and your industry – do they really know what they’re talking about? WILL – as you already know, in business, execution is key. You need to be confident that your lawyer will actually do what they say they will and that you won’t be chasing for updates. Do they have the relevant resources? In respect of bigger instructions, do they have a team to carry out the work? If they prove that they can do the work and will do the work in good time, then you can believe them. Stay away from the lawyers that reel off their client list to try and impress you….you could end up being the back of the queue.
  2. How do they help their community? Good old corporate responsibility! Do not over look this. Lawyers will flatter you to high heaven and impress you with their catalogue of work BUT a good way to tell if they really CARE is by assessing their charity. The best law firms know this and have a glossy pro bono team offering free legal services to those unable to afford legal representation. They also send their lawyers out to lecture, teach or tutor in their spare time. If you hear about a law firm or lawyer working in the community, that’s usually a sign that they have a soul and really will do what they say they will do. Ask the prospective lawyer what they do outside of work in their wider community?  What are their interests? This will also help you to get to know their personality and decide whether you  actually LIKE them.
  3. Meet everyone! In most cases your lawyer will be supported by a team of junior lawyers which they may head up and those junior lawyers will be the ones doing the work.  Ask to meet those people so that you can assess their personality and their experience. Are they bright? Do they know about your business or will they just be taking orders? How does the team function? It is important to feel confident that you will be looked after and that everyone who handles your work will give it the same level of care and attention. Also, meeting the team will inspire them. If that junior lawyer can out a face to the email address, they’ll work harder!

Ok so those are my 3 things to be happy  about before you hire a lawyer. It is well known that legal fees are not cheap BUT that doesn’t mean that you should part with your money just like that. You need to make sure that you’re in good hands. It’s not just about getting the work done. Engage a lawyer that you would want to hire as an employee in your business. The lawyer/client relationship is one that is built up and developed over years, so get it right!

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HOW to…sell your business.

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This is a follow up to my post “The bigger picture – selling your business”. In that post I gave you tips on how to polish your business into an attractive product to be purchased by a rich buyer. In this post I’m going to briefly explain HOW you can sell your business. There are two main ways. Either an asset sale or a share sale. There are pros and cons to each but ultimately your lawyer should be able to advise you on the best method, having considered the nature of your business.

In a share sale, the buyer will purchase everything to do with a company including all assets and liabilities, known and unknown. In an asset sale, the buyer will purchase the assets which make up the business of a company. In the former, pretty much everything stays the same save that the company has a new owner, in the latter, the company will still exist but it will usually be an empty shell harbouring only those assets and liabilities that the buyer did not want to buy.

Below, are some key considerations that will be influential in determining HOW you should sell your business.

  1. Liability

In a share sale, due to the fact that the buyer purchases the shareholding in the target company, it inherits all of the assets and liabilities in the target company. This means that the seller gets to walk away from any problems with the company and the buyer as the new owner, takes them on. If a buyer wants to purchase the shares in a company but it is riddled with liabilities such as ongoing litigation, tax investigations etc, it will negotiate a discount in the price of the shares that it is purchasing to reflect the risk of these liabilities or it will negotiate indemnities from the seller. A seller indemnity is basically a promise from the seller to the buyer that if things go wrong with said liability, the seller will pay to the buyer a sum of money as compensation.

In an asset sale, the buyer can effectively cherry pick which assets it will purchase and which liabilities it will assume. For example, the buyer can refuse to assume tax liabilities but it may take on certain ongoing disputes which are inherent in taking on, for example, service contracts.

  1. Employees

Usually, in an asset sale, employees do not need to be taken on by the buyer, though commonly the seller will require the buyer to offer new contracts to all or most employees on terms that are substantially similar or identical to their existing contracts (including a recognition of prior service) so that the seller avoids wrongful dismissal claims from the employees.

In a share sale, the target company’s employees remain employed by the company because nothing really changes. It’s just a sale and purchase of shares!

  1. Reduced Complexity

As you’ve probably cottoned on, share sales are much simpler than asset sales. The only documentation you need is in respect of the shares that are being purchasing. In an asset sale, each asset will effectively require its own contract. For example, there will be separate transfer documentation for equipment, vehicles, intellectual property, licenses, permits and real property.

An asset sale may also trigger the need to obtain third party consents to the transfer of the assets due to change of control provisions in contracts. For example a permit contract may say that the seller “must obtain written consent before it can transfer/assign the right to the permit”. In selling the permit as part of the assets, the seller must ask permission before it can go ahead. For obvious reasons, third party consents can be a pain to obtain; it just takes one unreasonable so and so to hold things up! It is always best to, if you can, give third parties a heads up and assure them of any changes in advance. This will make negotiation a lot easier.

So, the important thing to understand about a share sale vs an asset sale is that one method involves taking EVERYTHING whilst the other allows you to CHERRY PICK what you want. The form of sale that is best for your company really depends on the nature of your business and what it is that you want to sell. There is a heading that I have not covered but which is the most important consideration of all and that is TAX. TAX can determine how much you receive on a sale of your business and it differs in a share sale or an asset sale. This is where experts must be enlisted. I once worked on a deal where, three days before completion the whole structure changed because of TAX. I couldn’t believe it…so many sleepless nights!

As with all my posts, I cannot emphasise enough how important it is to get your lawyers involved but even more so when you are selling your business – after all you want to get the best price right?

Hope you found this helpful! Please like and please share!

The bigger picture – selling your business.

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Ok, so it’s great that you’ve got your own business and that you’re doing so well. BUT, the question is do you want to be doing this forever? I don’t think so. If your business isn’t getting passed on to another generation then you’re probably looking to, one day, sell it and make a hefty profit! This post is a heads up about the things you need to be doing NOW, in order to build a product (yes, your business is your product) that sells quickly and at the best price possible. Here are my top tips!

Keep it clean – Your business must not have skeletons in its closet. I’ve said this before. Either you eradicate those skeletons or you confess to them, preferably the former. If you have unpaid bills, taxes or ongoing litigation, your business will not sell or it may sell BUT at a DISCOUNTED price. This is because instead of purchasing a nice shiny product, the buyer is purchasing a whole lot of risk. Risk is financial uncertainty and in business we despise financial uncertainty. We are constantly mitigating against it. So, clean up your business and keep it clean. Carry out your due diligence REGULARLY. Do not neglect complaints from clients or scary regulatory letters. The buyer of your business will carry out its own due diligence and it will be thorough. Would you buy a car without a test drive or seeing under the bonnet? Nope, I didn’t think so.

Show them the money – If you want to sell your business you have to be super transparent with your numbers. Start planning now to make sure that your business has a financial record to attract a good buyer. Maintain a healthy working capital, renegotiate supply contracts and make sure that you are getting the best deals for your business. Also, get on top of your debt. Pay off as many of your loans as possible. Think about what is actually costing your business money. If your business requires a lot of machinery, are you using all of that machinery? Can you sell some of it? Don’t forget your forecasts – get them ready and back them up with evidence.

Create and implement a business manual – It is amazing how many of my clients do not have systems and procedures for the simplest of things to do with the day to day operation of their business. If you sell products worldwide, you should not be selling those products on ad hoc procedures. You should have a clear process that the buyer of your business can step into tomorrow and operate. You should have systems in place for every aspect of your business. You should have formalised documents. Get your lawyer to draft standard form employee contracts, terms and conditions, disclaimers, policies etc. Also, is the structure and ownership of the company clear? Make the ownership as clear and as transparent as possible.

Show them your A team – Behind every great business is a strong and passionate management team. Your management team is a big part of your business’ valuation. It is therefore crucial that you consider if your business can retain good employees – this may require considered incentives. The buyer of your business will want all your key people to be a part of the sale. It will also want the assurance that your business is not a DIY job; show off your professional support. Your lawyer, your accountant, your consultant all make an impression. Those relationships matter because they instil confidence in the buyer that everything to do with your business has been done properly. Also seek advice from your A team. What do they think? Get your lawyer to review your business structure and advise you as to whether you need to change it in order for it to be an attractive purchase. Your lawyer will take you through the whole process and organise all of the legal paperwork to ensure that there are no unnecessary complications before and after the sale. You really need everyone on board advising. I have worked on an international acquisition where the whole deal was restructured because of tax. It was cheaper to do it another way! Three days before closing we had to change everything!

You may be far off from selling your business at this point in time, but if you want a big pay out someday, you should start doing all of the above now!

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BREXIT explained.

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Before you read this, just in case you didn’t know, BREXIT refers to the possibility of Great Britain (aka the United Kingdom) leaving the European Union after the referendum in June 2016. It’s a play on the words Britain and Exit. In this post, I am going to try and explain the Brexit debate, however, please know that thelegalknow is wholly against BREXIT. I will therefore TRY to be as neutral as possible in this post.

What is a referendum?

A referendum is a general vote by the electorate on a single political question which has been referred to them for a direct decision. In the UK, David  Cameron, the current Prime Minister has approved a referendum asking the British public whether or not it thinks that Britain should remain in the European Union. The big day is Thursday 23 June 2016.

The exact question will be “Should the UK remain a member of the EU or leave the EU”?

What is the European Union?

Five years after World War II ended, France and Germany came up with a plan to ensure that their two countries would never go to war against each other again. The result was a deal signed by six nations to pool their coal and steel resources in 1950. Seven years later a treaty signed in Rome created the European Economic Community (EEC) – the foundations of today’s European Union. The UK was one of three new members to join in the first wave of expansion in 1973. Today the EU has 28 member states with a total population of more than 500 million.

At the heart of the EU are laws designed to allow most goods, services, money and people to move freely within EU member states.

The four key institutions which work together to run the EU are as follows:

  • the European Commission – the EU’s administrative arm – is responsible for proposing and drafting EU legislation;
  • the European Parliament – represents EU citizens – is responsible for approving draft proposals, together with the European Council, from the European Commission and making them law;
  • the European Council – represents member states – is responsible for approving draft proposals, together with the European Parliament, from the European Commission and making them law; and
  • the European Court of Justice – is responsible for upholding EU law in member states to make sure EU law is applied in the same way in all EU member states. It also settles legal disputes between national governments and EU institutions. Member states are required to comply with the court’s rulings and may be fined if they do not do so. This is completely separate from the European Court of Human Rights in Strasbourg, which interprets the European Convention on Human Rights, the EU has its own Charter of Fundamental Rights.

Each member state effectively appoints representatives to each of these institutions.

Why is there a referendum?

The British government promised to hold a referendum on EU membership before the end of 2017. There have been growing calls for a vote on whether to stay or leave the union, as it has allegedly become more powerful and expensive. The BREXIT campaign worries that the UK is paying more in membership fees but gaining little in return other than increasing immigration.

Why does Brexit matter?

The Brexit campaign maintains that by breaking free from the EU, the UK could reduce taxes for its citizens and reduce the burden of immigration. However, those campaigning to stay in the EU contend that if the UK should decide to go off on its own, the move could create widespread job losses and economic uncertainty. Currently, the EU is the UK’s largest trading partner. If enterprises in the new EU are reluctant to do business with British companies, British companies could face substantial setbacks.

Additionally, if Brexit occurs, the UK, just like Norway and Switzerland, will still have to comply with EU rules without having any influence over them. The UK’s exports would be subject to EU export tariffs and they would have to meet EU production standards. It could be even more costly for UK exporters if they face EU legal arguments against UK standards – there could be a lot more court cases (LAWYERS will get richer, YAY). There is therefore a feeling that the UK is always likely to be better positioned to secure beneficial trade deals as a member of the EU than as an individual and isolated player.

What will be the impact on the EU if Brexit occurs?

The potential implications of Brexit are complex, as they hinge largely on what economic actions the UK takes after splitting off from the rest of the EU and how the rest of the world reacts to such a move. The impact would be widespread and drawn-out. The actual process of the UK leaving the partnership and establishing new agreements with remaining EU countries would take years. Many businesses would face immense uncertainty during this time.

In order to reduce this uncertainty, Brexit advocates are weighing potential options. They’re considering either supporting a second referendum on which model to pursue or making an effort to create a consensus behind what the UK’s trade deals would look like after the nation’s exit. Sounds like a political mess to me!

So there you have it. BREXIT in a nutshell. You should hopefully now have a vague idea of what’s going on. I tried to stay neutral but I love and care about business and the arguments to STAY in the EU make economic sense to me. The pennies we would save in domestic tax pail in comparison to the billions we could lose in trade with the EU and the world (President Obama made America’s view very clear). If you are a UK business owner/entrepreneur reading this, please make sure that you VOTE and vote for what you think will be GOOD for UK BUSINESS not UK AESTHETICS.

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Are you clear?

 

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It’s been a while. Like you, I’ve been busy. So much is going on and it is great. I’m learning more and more about the things that people like you (business owners and entrepreneurs) need from their lawyers. However, in the last few weeks something has come to my attention. Lawyers are renowned for it but it appears that we have finally passed it on to our clients….ridiculous speech.

What happened to just saying it how it is? Where is all this diplomacy  (by this I mean, indirect, I don’t want to hurt your feelings kind of speech) coming from? In my opinion, there is no room for diplomacy in business. Business must be clear, direct and concise or else there is a risk of miscommunication, and miscommunication can be fatal. When we don’t understand our offers, counter offers and rejections, opportunities are lost. If you want me to make you an offer for a pink car, DON’T ask me “what else can you do for me?” when I make you an offer for a blue car. Just ask me what my best price is for a pink car! Then, we can have an honest negotiation about what you actually want and what I want to give you because hey, its good business for me!

I recently had to agree a fee arrangement with a client. It took months. It wasn’t that they didn’t want to pay. They just wanted to pay in the best possible way for their business. I have to admit that I was impressed. These dudes didn’t just take our usual options a, b or c at face value. They demanded an understanding of each option and an examination of why any of those options would be good for them. The solution, a unique fee arrangement where I get paid and my client is happy paying.

SO, strip away the phoney language that you may have learnt in business school or read in the Financial Times and communicate honestly. Try it today, have a plain English (or whatever language you speak) conversation with your business partners. Come back here and leave your comments below. It felt good right? Like the rain had cleared and the sun had come out!

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Legal fees can be flexible.

 

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How many of you pay your legal fees as part of a pay as you go plan? It’s expensive right?The reality is that a good lawyer with some sort of experience, should be able to give you a fee quote give or take a few pounds. They should be able to offer you some sort of fixed fee arrangement . HOWEVER there are circumstances where legal fees can easily spiral out of control and such circumstances tend to arise in litigation. Often lawyers can get away with saying “how long is a piece of string” when it comes to estimating their legal fees in litigation and this is UNFAIR because in litigation there is NO guarantee that you will win. You could easily pay £50k in legal fees and not see a dime from the other side or even have to pay the costs of the other side too! SCARY!

The good news is that there is a way to get lawyers to buy into the risk of litigation and CARE about that piece of string. In the UK there are Conditional Fee Agreements (CFAs) and Damage Base Agreements (DBAs) and they are pretty good at encouraging realistic assessments of litigation, from your lawyer. Here’s a brief breakdown.

CFAs

A CFA is an agreement whereby a lawyer and a client can agree to share the risk of the litigation by coming to a financial arrangement whereby part or sometimes all of the solicitors’ fees will only be payable by the client in the event of success. So for example you might agree that you only pay your legal fees if you win (your lawyer will scream) but in return for the risk that you may lose, your lawyer might say ok but you will have to pay me an additional amount of X% of my fees if you win (you will scream BUT it’s not a bad offer as this only arises if you win). Or you may say to your lawyer I will pay you half of your fees and if I win, I’ll pay the other half. Your lawyer may say ok but, again, if you win, you pay the other half and a success fee of x% of my total fees. Can you see the bargaining power shift and settle in these examples. Each side has a stake in the litigation. You care because it’s your law suit BUT now your lawyer cares because he or she may not get paid!

DBAs

A DBA is an agreement between a lawyer and a client under which the client agrees to pay the lawyer a percentage of its damages if it wins its law suit. So for example you might agree with your lawyer that if you win your claim for breach of contract which is worth £300,000, your lawyer will get half of whatever you recover from the other side. This is  a huge risk for your lawyer as they won’t be getting paid unless you win BUT it forces your lawyer to consider if the claim is actually worth bringing. Your lawyer will be forced to seriously consider whether they will realistically get paid and therefore whether you have a decent case. You can make DBAs more complex too. For example you may say if you win £300,000 from the other side, your lawyer gets 50%, if you win £200,000 from the other side your lawyer gets 40% and if you win £100,000 your lawyer gets 30%.

Also do not forget FIXED FEE arrangements. If you are instructing your lawyer to do some standard conveyancing work or some corporate work, get a fixed fee! They do that kind of work all the time so the variables never really grant a “pay as you go” regime. If you are not in the UK I’m sure that these payment plans exist in some form or other in your country, so look it up!

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