How To Control Your Legal Fees

As with most service businesses, fees for legal services are determined by three criteria: the amount of time spent, the knowledge of the attorney and the experience required to perform the service. A savvy client can control the cost of legal representation by following these simple steps:

Negotiate major business points
By negotiating price, payment terms and other purely business points, and keeping the lawyer in the background, you can keep legal fees down. However, keep your attorney advised of the progress of negotiations so he or she is informed about the terms of the deal and better able to advise you on the ramifications of the points requested by the other side. After you’ve confirmed the primary terms, your lawyer will be able to negotiate the legal aspects of the contract and draft the final documents reflecting the business deal.

Obtain and organize relevant documents before turning the project over to your lawyer.
Often a client will leave the identification and organization of relevant documents until the last minute. This is inefficient and causes the attorney to work in a “crunch,” which can increase legal costs. Having the relevant documents organized and available when you meet with your attorney will reduce the bottom line on your legal bill.

Don’t hesitate to show your attorney form contracts
If you have a form or document you’d like to use for your business, it may be adequate with few revisions. If the document is not copyright protected, your attorney should be able to adapt it to your business needs with minor changes. On the other hand, if the transaction is complicated or unique, it’s more cost-effective to let your lawyer put her experience to work drafting the document from “scratch.”

Keep your lawyer informed about your business
The more your lawyer knows about your general business activities, the less time she or he will need to become knowledgeable on any one particular issue when a specific legal need arises. Also, your lawyer can better advise you about the ramifications of any particular action if she or he understands the context of the event.

Investigate important events quickly
If an event occurs that you think may later develop into a claim for or against your company, investigate it immediately. You may want to call your lawyer to discuss the best way to conduct the investigation. Then talk to the people involved. Write a letter to your lawyer summarizing the events you believe may have caused the problem. Have any witnesses write a letter to your lawyer describing what they know. The more you do at the outset, the less your lawyer will have to do later to substantiate the event. Also, in any dispute, a contemporaneous recording of the event is more credible than one recorded at a later time. In other words, that memorandum or e-mail written during the crisis is much more believable than the one you prepared for your attorney after the fact.


Protecting Your Business: Understanding Co-Ownership of a Business

Regardless of how your business is organized -- as a corporation, a partnership or an informal business venture between family and friends -- jointly owning and managing a business is a lot like being married. Who does what in the company, and when? Who gets what from the enterprise, at what time? All co-owners of the company must make decisions jointly through cooperation and compromise.

Do you know what could happen when co-owners disagree and are unable to compromise on important issues, such as whether to employ all owners and how much to pay an owner/employee? It’s best to have a written agreement that sets out what happens if a co-owner dies, divorces or just wants to retire from the business. When co-owners fail to put in place clear, written agreements that govern these types of issues, expensive and time-consuming litigation can bring a thriving business to a halt while disputes are resolved in a court process.

If you have such a written agreement for your co-owned business, revisit the document periodically with your co-owners to determine if it reflects your current desires for governing the business. It’s much easier to determine or revise the terms of such an agreement before a crisis arises than to negotiate the terms later in a courthouse and an atmosphere of bad feelings.


Buying or Selling A Business: Tips for Success

Buying or selling an operating business can be profitable. Here are some basic tips to consider whether you’re a buyer or a seller.

  • Look at the governing documents for the business being bought or sold. Is it a sole proprietorship, a corporation, a partnership or some other entity? Make sure all documents that establish and control the business entity are current and provide the necessary authority to conduct the business operations.
  • Review all contracts used in the business, such as loan paperwork, leases, and vendor and client contracts. Do the terms of these contracts meet your expectations of the company’s level of clientele and business expenses? Are there any oral agreements in addition to the written ones?
  • Examine all financial records in their original form. Have an accounting professional review the records if necessary. Ask whether the bank statements match the reported income and expenses of the business. Look at a representative sample of checks and deposit slips to determine whether the income and expenses of the business are accurately stated.
  • Determine the sale device -- is the stock or merely the assets of the company being transferred? Make sure the sale documents reflect the business deal and contain the representations and warranties of both parties.
  • Negotiate the “deal points” of the transaction. These points are “what, when and where” questions that make up the business deal itself.
  • Ask your lawyer to step into the process any time you need assistance, whether during the initial review of the transaction (called “due diligence”) or at any other time up to the drafting of the sale documents and the closing of the sale. The more complex the deal becomes, and the more valuable the transaction, the more likely you’ll want to involve your attorney.

Non-Competition and Non-Disclosure Agreements: Are They Enforceable?

Many employment contracts contain non-competition or non-disclosure agreements, or both. Covenants not-to-compete are the most difficult for the employer to enforce if the provisions are not written properly. The Texas courts and the Texas legislature disagree about the enforceability of non-competition agreements. The Supreme Court of Texas has held that for a non-competition agreement to be enforceable, the employer must have some type of agreement with the employee that gives the employee something of value -- most often trade secrets, confidential information or other proprietary information -- which the employee promises not to disclose.

A properly written and generally enforceable non-competition agreement will also contain language that:

limits the geographical area to which the agreement applies.
limits the duration of time the agreement will be in effect.
details the scope of the prohibited activity.

Courts will generally decline to enforce any non-competition agreement that seems to overly restrain someone from earning a reasonable living. In contrast, a non-disclosure agreement does not restrain a former employee from earning a living, it merely restricts a former employee from competing with the former employer by using secret, confidential or proprietary information the employee obtained while working for the former employer.

For a non-disclosure agreement to be enforced, the information obtained by the former employee must be truly confidential and not just general knowledge or experience acquired by the employee during the term of employment. To determine if the information obtained by the employee falls under the secret, confidential or proprietary banner, courts may look at the following:

  • whether the access to the information is physically restricted.
  • whether employees who have access to the information are required to sign confidentiality agreements and are educated by the employer as to the need to protect such information.
  • whether outside suppliers, vendors, contractors, distributors, sales reps, etc. who have access to the information are required to sign confidentiality agreements.
  • whether chemical formulations, computer data and similar information is restricted in access or the identity of the information is disguised.

When drafting both types of agreements, it’s important not to use overly broad language and to be as specific as possible when detailing the types of conduct you wish to specifically prohibit.


Contracts: Get It In Writing!

Sealed with a handshake? American business was founded on the oral promise to guarantee performance of a particular act. Today, however, many agreements must be put in writing to be enforceable. A written document also ensures that all parties understand the essential terms of the agreement. In some cases, a written document is absolutely necessary to enforce a contract.

A law called the Statute of Frauds governs when an agreement must be in writing. This law was written to prevent fraud and perjury by requiring special written evidence as a condition to enforcement of the contract. Business contracts that must be in writing are:

  • promises to pay the debt of another.
  • the sale of land.
  • contracts that cannot be performed within one year.
  • the sale of goods for $500 or more.

In all other situations where an agreement is made, the Statute of Frauds does not apply. As long as there is mutual agreement and promises made, and the contract is not illegal, an oral contract is legally enforceable. Even if only an oral contract exists when the Statute of Frauds requires a written document, the contract is not void, merely unenforceable. This means if a contract that should have been in writing is completed, i.e. all terms of the contract have been performed, the contract will not be undone for lack of a written document.

For example, an oral contract to sell a painting for $750 is effective to transfer ownership of the painting even though no written contract exists. However, if one of the parties does not perform their part of the agreement, the contract will be unenforceable because of the failure to comply with the Statute of Frauds. Contracts need not be complicated to be enforceable. Even a memorandum signed by the person against whom the contract is being enforced that sets out certain essential terms of the agreement is sufficient.

The written agreement must include:

  • the identity of the contracting parties.
  • a description of the subject matter of the contract.
  • the terms and conditions of the agreement.
  • a recital of the payment.
  • a signature of the party against whom the contract is to be enforced.