A dollar in time saves 90 000 (by avoiding a legal dispute)
Have you ever known deep down that you should do something, and then kicked yourself when you did not? Perhaps you had a sore tooth that you didn’t get checked out until it got infected or the cavity was massive, when the tiny hole at the start would have been easier to fix?
In business, we all have those moments too, don’t we?
Such as taking on a client because we like them or because they are going to bring in extra money, when we don’t quite feel right about them, and then they turn out not to be the right fit, and suck up your time and don’t appreciate what you do.
It can be pretty sickening when one of those regrets are “I should have spoken to a lawyer first, to avoid a legal dispute”.
Paula* is a long-time friend of mine and she did not listen to her instinct about getting proper advice on a business deal.
When she told me at a Christmas party a couple of years ago, that she was getting involved in a business with someone she admired and greatly respected, I was excited for her.
Let’s call her business associate Shawn (because in the end, he sure did fleece my friend).
Of course, the lawyer in me, reminded me to get it all in writing. No problem, Shawn was sorting that out as he had a lawyer.
I pointed out the Shawn’s lawyer would be acting in Shawn’s best interests and she should get her own advice to make sure he did not take Paula for a ride. Of course, she would.
Her whole life savings were at stake.
I suggested that she should never sign anything she didn’t fully understand. Of course, not! Paula had been in the armed forces for decades and would never let anyone take advantage especially when her life-savings was on the line.
“Remember, I am the lawyer in your corner and I have your back,” I said. “Let me know if you need any help.”
”Absolutely,” said Paula. “You are my ‘legal lioness’. There is no one I trust more than you!”
I explained that a legal dispute can often be avoided simply by getting the right legal advice up front and making sure the contracts reflect what you think the deal is.
I did not hear from Paula again until this Christmas.
She had gone into business with Shawn, but it was not really working out. After two years, her business problems with Shawn were so complex, that we ended up meeting for two hours to try and decipher exactly what had happened.
She arrived at my office starting off with “I know I should have got legal advice first, but we trusted our buddy”.
If I had a dollar for every time I hear a client say that (and every time those situations went wrong), I would be rich and only working 6 months a year and not having to charge a cent, because I love helping people.
Well, it turned out that Paula had followed step 1 of my advice and had gotten their deal down in writing. Unfortunately for my friend, every written word was designed to make sure that she did all the work and forked over the profits to Shawn. Paula was shocked when I explained exactly what some of the contractual terms meant.
On top of that, Shawn had no responsibility if things went wrong.
So, my friend invested $90 000 into the business.
Her current legal bill (even at Mates Rates) is well over $5,000 and we are only at the start of the process. Legal costs are likely to be around $35 000 to get her out of the deal. If it goes to court (which it might if Shawn refuses to release Paula from the contract), then the legal costs are likely to be around $100,000 to $150,000 (and there is no guarantee that my friend would win the case, because the contract was simply a bad business deal for her and good one for Shawn).
If Paula cannot escape from the terms of the contract, she will go bankrupt.
The stress and distraction of trying to resolve this legal dispute, rather than focusing on building her business has been enormous and might send her broke anyway.
If Paula had got me to review the documents in the first place, the cost would only have been a few hundred dollars. Instead she faces the prospect that her initial investment is likely wasted, and having to pay tens of thousands in legal fees which would could have been avoided by getting the proper legal advice from the start.
Unlike some business owners, Paula did not forget to get my early input because she was worried about the cost. She simply trusted her friend, Shawn not to rip her off. Shawn does not believe he ripped her off. He simply thinks he has made a good business deal.
To help you a avoid a legal dispute, get your lawyer to review any contracts (especially ones relating to business relationships) before you sign them. If you do not have a lawyer, email the contract to Cathryn for a free quote on email@example.com or you can a book a free 15 minute chat into her diary here:
Meet Cathryn Warburton – one of YMag’s Experts:
Cathryn Warburton is an award-winning solicitor and patent attorney. She is The Legal Lioness with a passion for safeguarding her clients’ business and intellectual property interests. She is a partner at Acacia Law www.acacialaw.com
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Thankyou.. YMag Team
* For privacy reasons, some details may have been changed. Please note that this blog is provided for general informational purposes only. Each legal situation differs. Reading this blog cannot replace obtaining specific legal advice. We recommend that you obtain legal advice for your specific situation.