Hello, all. I just wanted to thank those of you who attended my seminar last night on minimizing litigation exposure and risk ("An Ounce of Prevention...."). I think the information was well received during its test run and so....if you or someone you know may be interested in having me present the same seminar, I will be glad to do so. It is free of charge and I am happy to come to you. I'm just interested in getting the word out.
I hope you all have a great weekend and we'll get back to business on Monday.
Friday, October 31, 2008
Thursday, October 23, 2008
They All Look The Same To Me
So, it happened again yesterday. Someone (who agreed to let me tell this story on the condition I withheld the name - like I'm writing for the WSJ or something) came to me with a contract problem. The story goes like this: Client X is a widget distributor here in Florida. He buys his widgets from Supplier A, who is in Arkansas. The parties have a contract that Client X will serve as Supplier A's exclusive distributor in Florida. Client X's business is driven almost entirely by the revenue generated from its sales made on behalf of Supplier A.
Guess what happens? Supplier A finds someone else he likes better as a distributor and starts using Distributor B. Understandably, Client X is furious and scared. The prospect of losing an entire line of work is an awful prospect whether these be good times or bad. As a result, I get a phone call. I want to sue and I want it to be painful, Client X tells me. They knowingly breached my contract. I want damages for the loss of my business, the headache they caused me and the emotional distress. Translation: drive Supplier A into the ground.
This is tricky territory. Telling a client they can't have everything they want tends to make unhappy people even unhappy- er (assuming that's some kind of word). Of course, Client X has a cause of action for breach of contract. Of course, Client X can recapture lost revenue for the present and for some time into the future even. The whole purpose of a breach of contract action is to give you back the benefit of the bargain you made
The bad news - it doesn't matter that Supplier A did what it did with intent or on purpose. One breach is no worse or better than the other. They are all the same. In fact, the law honors the efficient breach of contract. If Supplier A found out that Distributor B could offer the same or better service for less, there might be perfectly good reasons to go with Distributor B. The law, however, says that Supplier A has to make things right with Client X.
By the same token, Supplier A may have no reason at all to choose Distributor B. The result, from a legal perspective, is the same. No extra points for malice here.
Guess what happens? Supplier A finds someone else he likes better as a distributor and starts using Distributor B. Understandably, Client X is furious and scared. The prospect of losing an entire line of work is an awful prospect whether these be good times or bad. As a result, I get a phone call. I want to sue and I want it to be painful, Client X tells me. They knowingly breached my contract. I want damages for the loss of my business, the headache they caused me and the emotional distress. Translation: drive Supplier A into the ground.
This is tricky territory. Telling a client they can't have everything they want tends to make unhappy people even unhappy- er (assuming that's some kind of word). Of course, Client X has a cause of action for breach of contract. Of course, Client X can recapture lost revenue for the present and for some time into the future even. The whole purpose of a breach of contract action is to give you back the benefit of the bargain you made
The bad news - it doesn't matter that Supplier A did what it did with intent or on purpose. One breach is no worse or better than the other. They are all the same. In fact, the law honors the efficient breach of contract. If Supplier A found out that Distributor B could offer the same or better service for less, there might be perfectly good reasons to go with Distributor B. The law, however, says that Supplier A has to make things right with Client X.
By the same token, Supplier A may have no reason at all to choose Distributor B. The result, from a legal perspective, is the same. No extra points for malice here.
Wednesday, October 22, 2008
Uber-What?
As I mentioned last time, there is a new decision on a concept of marine insurance that applies to all you boat owners and commercial vessel operators - uberrimae fidei. Just a few weeks ago, a federal appeals court confirmed that the concept of uberrimae fidei was a federal legal concept and applied to marine insurance.
Why in the world do you care, is what you are probably asking yourself? What could something I have never heard of and can't even tell what language it heralds from possibly have to do with me? I'll tell you - and it may be more important than you think.
Literally translated, the phrase means "the most abundant good faith" and that's what you, the insured, are charged with as an obligation when you apply for marine insurance. In practice, it means you must disclose everything and hide nothing when seeking marine insurance and submitting a claim. It is a very high standard of conduct - very high.
And when I say "everything," I mean it. In the case mentioned above, the insured applied for marine insurance and claimed that the vessel was worth $600,000. When it sank, the insurer learned that the vessel was actually sold for $400,000 in a financed transaction and denied the claim. Even better, the insurer then sued the insured to void the policy dating back to the date it was formed on the grounds that the insured's misrepresentation as to the vessel's value violated the concept of uberrimae fidei. The insurer won and the policy was voided. Try getting insurance after that happens.
You may be thinking, $200,000 in value is a misstatement of value by a third. That's almost like fraud.
True enough, but here's the real kicker- the concept of uberrimae fidei does not require that you intentionally lie or hide something. In fact, the concept of making an intentional misrepresentation doesn't count for anything. The only thing that matters is that the misrepresentation is material. In the recently decided case, there was contradicting evidence as to whether the vessel owner really believed the lost yacht to be worth $600,000. The court said that whether or not he misstated the value was irrelevant - and he lost.
Marine insurance, unlike a lot of contractual relationships, imposes a very high standard on the insured to be truthful. The consequences are potentially dire for those who don't take it seriously.
Why in the world do you care, is what you are probably asking yourself? What could something I have never heard of and can't even tell what language it heralds from possibly have to do with me? I'll tell you - and it may be more important than you think.
Literally translated, the phrase means "the most abundant good faith" and that's what you, the insured, are charged with as an obligation when you apply for marine insurance. In practice, it means you must disclose everything and hide nothing when seeking marine insurance and submitting a claim. It is a very high standard of conduct - very high.
And when I say "everything," I mean it. In the case mentioned above, the insured applied for marine insurance and claimed that the vessel was worth $600,000. When it sank, the insurer learned that the vessel was actually sold for $400,000 in a financed transaction and denied the claim. Even better, the insurer then sued the insured to void the policy dating back to the date it was formed on the grounds that the insured's misrepresentation as to the vessel's value violated the concept of uberrimae fidei. The insurer won and the policy was voided. Try getting insurance after that happens.
You may be thinking, $200,000 in value is a misstatement of value by a third. That's almost like fraud.
True enough, but here's the real kicker- the concept of uberrimae fidei does not require that you intentionally lie or hide something. In fact, the concept of making an intentional misrepresentation doesn't count for anything. The only thing that matters is that the misrepresentation is material. In the recently decided case, there was contradicting evidence as to whether the vessel owner really believed the lost yacht to be worth $600,000. The court said that whether or not he misstated the value was irrelevant - and he lost.
Marine insurance, unlike a lot of contractual relationships, imposes a very high standard on the insured to be truthful. The consequences are potentially dire for those who don't take it seriously.
Tuesday, October 21, 2008
It's The Little Things
Happy Tuesday. I was going to use today to discuss an insurance concept that recently got some attention in the federal courts, but I found something that I think may be of interest to all of you. Now that we've all kissed our retirement funds good-bye and watched easy money go out the window as easily as it seems to have come in during the era of overstated earnings and inflated balance sheets, I present you with a list of things you should consider before you hire a lawyer.
It's a little long for this blog, I'll admit, but I believe that the information is very helpful. You may wonder why I would send out something like this, since I make money based upon your questions and problems. The answer is simple: I want you to come back. If you use me to solve a $500 problem and spend $2000, that is not a good use of your resources. I want you to have enough information at your fingertips that you can properly make your own decision as to whether you should pick up the phone.
So, without further ado, then, I present the following:
Ask. Ask yourself this very important question before you do anything: Do you need a lawyer? The best way to save money on legal expenses might be to keep lawyers out of the equation. This definitely isn’t right for every legal matter, but it could be right for yours. Consider:
If there is very little money at stake, hiring a lawyer may not be cost effective. You may be able to identify a paralegal or consultant with the needed expertise.
Go to small claims court. Small claims court exists for a reason. It helps people have their day in court to resolve small disputes. The precise rules and requirements vary by jurisdiction, but it can be a cheap option to litigate a monetary claim. You can generally pursue amounts up to a few thousand dollars in small claims court. The filing fees are usually a small amount. You typically do not hire a lawyer in these cases; you pursue the case on your own.
Buy unbundled services. Perhaps you need a lawyer for part of a matter, but you can handle some things on your own. Unbundled legal services could be the frugal solution. This innovation breaks down legal services into discrete parts, letting clients purchase only what they need. Under this model, you could hire an attorney to just give advice on a certain situation. Or you could hire someone to review contracts for you. Unbundled services can be a win-win deal for clients and lawyers. The client gets exactly the needed services and only has to pay a minimum amount. And the lawyer can work on discrete matters for a variety of interesting clients.
Educate yourself. Regardless of the legal option you choose, you need to educate yourself. Even if you hire an attorney for all your legal needs, you should make sure you understand what’s going on. One simple thing you can learn is legal terminology. Your attorney should be able to speak to you in plain English, but there are still legal terms involved. If you take the time to find definitions for things, you save your attorney’s time in explaining them to you. In most arrangements, saving time for your attorney saves you money.
Provide all the details. After you have decided to hire a lawyer, you have to communicate with him. To help your lawyer work as efficiently (and cheaply) as possibly, get all your details together. If you’re prepared to answer the lawyer’s questions, you can make the most of any meetings you have. In today’s computer age, it’s easy to keep records and documents handy. You could just create a Google Doc of information about your case. When something happens, or a memory resurfaces, make a note of it. You could share this Doc with your attorney through Google or just email it to him.
Group your questions. If your attorney is billing by the hour, you want to minimize the time he has to spend on your matter. Most attorneys bill in six-minute increments, so even a quick phone call to your attorney will cost 1/10th of an hour (possibly $25). This doesn’t mean you shouldn’t contact your attorney. But you should be efficient in that contact. Don’t call your attorney five times during the day. Make a list of things you’d like to talk about and call once. The same applies to email.
Ask for alternative billing. Lawyers don’t have to bill by the hour all the time. In fact, many lawyers are using different billing methods precisely to lower the cost of legal services. If you want to lower your attorney’s fees, ask about alternate billing arrangements:
Contingency fees are a popular method of billing in cases like personal injuries. You pay your attorney a percentage of the amount you recover.
Attorneys use flat rate billing when the amount and nature of work is predictable. If you have a routine traffic court matter, a flat rate might make your cost easy to foresee. Flat rates can also help you get a simple will drafted and signed.
Stay focused on the goal. A wise business attorney once said that the client is truly in trouble when they’re fighting “for the principle of the matter.” If you’re fighting for principles, your costs will likely skyrocket. That doesn’t mean you shouldn’t stand up for your beliefs, but sometimes fighting in the legal arena can be a bad business decision. The same rationale applies to people who want to harass people through the courts. An unscrupulous attorney might help you, but it will likely be expensive. Do you think an attorney who will simply harass your adversary will turn around and bill you fairly? Always keep your focus on the end goal, and make sure your attorney knows that goal as well. Ask yourself how certain decisions might affect reaching that goal. If you get off course, talk it over with your attorney and get back on track. You’ll save money in the end.
It's a little long for this blog, I'll admit, but I believe that the information is very helpful. You may wonder why I would send out something like this, since I make money based upon your questions and problems. The answer is simple: I want you to come back. If you use me to solve a $500 problem and spend $2000, that is not a good use of your resources. I want you to have enough information at your fingertips that you can properly make your own decision as to whether you should pick up the phone.
So, without further ado, then, I present the following:
Ask. Ask yourself this very important question before you do anything: Do you need a lawyer? The best way to save money on legal expenses might be to keep lawyers out of the equation. This definitely isn’t right for every legal matter, but it could be right for yours. Consider:
If there is very little money at stake, hiring a lawyer may not be cost effective. You may be able to identify a paralegal or consultant with the needed expertise.
Go to small claims court. Small claims court exists for a reason. It helps people have their day in court to resolve small disputes. The precise rules and requirements vary by jurisdiction, but it can be a cheap option to litigate a monetary claim. You can generally pursue amounts up to a few thousand dollars in small claims court. The filing fees are usually a small amount. You typically do not hire a lawyer in these cases; you pursue the case on your own.
Buy unbundled services. Perhaps you need a lawyer for part of a matter, but you can handle some things on your own. Unbundled legal services could be the frugal solution. This innovation breaks down legal services into discrete parts, letting clients purchase only what they need. Under this model, you could hire an attorney to just give advice on a certain situation. Or you could hire someone to review contracts for you. Unbundled services can be a win-win deal for clients and lawyers. The client gets exactly the needed services and only has to pay a minimum amount. And the lawyer can work on discrete matters for a variety of interesting clients.
Educate yourself. Regardless of the legal option you choose, you need to educate yourself. Even if you hire an attorney for all your legal needs, you should make sure you understand what’s going on. One simple thing you can learn is legal terminology. Your attorney should be able to speak to you in plain English, but there are still legal terms involved. If you take the time to find definitions for things, you save your attorney’s time in explaining them to you. In most arrangements, saving time for your attorney saves you money.
Provide all the details. After you have decided to hire a lawyer, you have to communicate with him. To help your lawyer work as efficiently (and cheaply) as possibly, get all your details together. If you’re prepared to answer the lawyer’s questions, you can make the most of any meetings you have. In today’s computer age, it’s easy to keep records and documents handy. You could just create a Google Doc of information about your case. When something happens, or a memory resurfaces, make a note of it. You could share this Doc with your attorney through Google or just email it to him.
Group your questions. If your attorney is billing by the hour, you want to minimize the time he has to spend on your matter. Most attorneys bill in six-minute increments, so even a quick phone call to your attorney will cost 1/10th of an hour (possibly $25). This doesn’t mean you shouldn’t contact your attorney. But you should be efficient in that contact. Don’t call your attorney five times during the day. Make a list of things you’d like to talk about and call once. The same applies to email.
Ask for alternative billing. Lawyers don’t have to bill by the hour all the time. In fact, many lawyers are using different billing methods precisely to lower the cost of legal services. If you want to lower your attorney’s fees, ask about alternate billing arrangements:
Contingency fees are a popular method of billing in cases like personal injuries. You pay your attorney a percentage of the amount you recover.
Attorneys use flat rate billing when the amount and nature of work is predictable. If you have a routine traffic court matter, a flat rate might make your cost easy to foresee. Flat rates can also help you get a simple will drafted and signed.
Stay focused on the goal. A wise business attorney once said that the client is truly in trouble when they’re fighting “for the principle of the matter.” If you’re fighting for principles, your costs will likely skyrocket. That doesn’t mean you shouldn’t stand up for your beliefs, but sometimes fighting in the legal arena can be a bad business decision. The same rationale applies to people who want to harass people through the courts. An unscrupulous attorney might help you, but it will likely be expensive. Do you think an attorney who will simply harass your adversary will turn around and bill you fairly? Always keep your focus on the end goal, and make sure your attorney knows that goal as well. Ask yourself how certain decisions might affect reaching that goal. If you get off course, talk it over with your attorney and get back on track. You’ll save money in the end.
Wednesday, October 15, 2008
Consider This
Everyone, please take note, I will gladly discuss any topic you recommend to me. Just send me an e-mail with a question or recommended topic and I will put something together. I say this because I write a lot about contractual relationships and get most of my requests to discuss matters relating to contracts. If, however, you have something else you would like for me to discuss, let me know and I'll get on it.
For today- consideration. Every contract must have consideration, which is defined as "the inducement to a contract" or "the cause, motive, price, or impelling influence which induces a contracting party to enter into a contract." Well, that was easy - or was it?
Despite how it reads, consideration is not the clearest concept in the world and has definite problems in it application to the real world. In essence, consideration requires that there be a bargained for deal that flows to both parties in a contract. You can't just have things running one way. The most basic example I can offer is this: you do not have a contract if all you have is a one-sided promise. A piece of paper promising to deliver 1,000 widgets by Fed Ex on November 1 at 2:00 p.m. is not an enforceable contract.
Why? Because, although you have a number of specific and distinct promises that lay out in detail what is being promised by one party, you do not have any explanation as to what the inducement for those promises is (the consideration). For instance, will you be paying money for these promises? Will you be giving something else?
To have a real contract, then, you have to lay out what the bargain is on each side of the table. A simple promise by someone to do something is not an enforceable contract. Consider it.
For today- consideration. Every contract must have consideration, which is defined as "the inducement to a contract" or "the cause, motive, price, or impelling influence which induces a contracting party to enter into a contract." Well, that was easy - or was it?
Despite how it reads, consideration is not the clearest concept in the world and has definite problems in it application to the real world. In essence, consideration requires that there be a bargained for deal that flows to both parties in a contract. You can't just have things running one way. The most basic example I can offer is this: you do not have a contract if all you have is a one-sided promise. A piece of paper promising to deliver 1,000 widgets by Fed Ex on November 1 at 2:00 p.m. is not an enforceable contract.
Why? Because, although you have a number of specific and distinct promises that lay out in detail what is being promised by one party, you do not have any explanation as to what the inducement for those promises is (the consideration). For instance, will you be paying money for these promises? Will you be giving something else?
To have a real contract, then, you have to lay out what the bargain is on each side of the table. A simple promise by someone to do something is not an enforceable contract. Consider it.
Friday, October 10, 2008
Consideration and Single Party Promises
As predicted, yesterday's entry seems to have gotten people looking at the contractual arrangements and following up. I'm glad and you'll be better off in the long run - believe me.
Along the same vein as yesterday, let's "talk" about those papers that are signed by only party. The most common example -promissory notes. I have a lot of clients who sign promissory notes - and a lot of them want to know why they have an enforceable agreement if they are the only ones who signed.
Without getting into an explanation that ate up $20,000 of the $90,000 of tuition spent on law school, here's the briefest possible explanation. Agreements are full of promises (which the Old English thought sounded stupid, so they called them "covenants"). Each promise has to either be bilateral (meaning each of you promises something) or a promise has to be supported by consideration (I am giving you something of value in exchange for your promise). So---when you sign a promissory note, you are promising to pay X dollars in exchange for the x dollars that the person who loaned it to gave. That's consideration for the money.
If that makes your head swim (you should have seen me in contract class 18 years ago trying to get my head around that), try this - you can enforce a written promise so long as whatever it is was signed by the person against whom you are seeking enforcement.
Along the same vein as yesterday, let's "talk" about those papers that are signed by only party. The most common example -promissory notes. I have a lot of clients who sign promissory notes - and a lot of them want to know why they have an enforceable agreement if they are the only ones who signed.
Without getting into an explanation that ate up $20,000 of the $90,000 of tuition spent on law school, here's the briefest possible explanation. Agreements are full of promises (which the Old English thought sounded stupid, so they called them "covenants"). Each promise has to either be bilateral (meaning each of you promises something) or a promise has to be supported by consideration (I am giving you something of value in exchange for your promise). So---when you sign a promissory note, you are promising to pay X dollars in exchange for the x dollars that the person who loaned it to gave. That's consideration for the money.
If that makes your head swim (you should have seen me in contract class 18 years ago trying to get my head around that), try this - you can enforce a written promise so long as whatever it is was signed by the person against whom you are seeking enforcement.
Thursday, October 9, 2008
Counterparts
For those of you reading along for the last few months, you know that I harp on the idea of ensuring the regularity of your relationships by putting together written contracts whenever possible.
A corollary to my rule requiring you to memorialize your relationships is that contracts require signatures. Let me say that again, contracts require signatures. I know you won't and don't believe me when I tell you that over half of the cases I litigate include contracts where one (or even both parties) did not sign the contract. I wish I were making this up. Clients way too often spend time and money setting up a written arrangement and think that signatures are just formalities or, as I have also learned, get so enthusiastic about the new relationship that they charge full speed ahead without dotting all the "i"s or crossing all the "t"'s.
Logistics also plays a part in why clients don't get signatures. I hear often that Party A doesn't want to send its signed contract original to Party B in Lithuania for signature. Why? Because it's the original contract. Somehow, having an incomplete document is better than sending the original off to make sure the whole thing is fully executed.
Well, guess what? You have no excuse. The law permits signatures in counterparts. In fact, if you look at the vast majority of your contracts, you will find that there is an express provision in your agreement that allows for execution in counterparts. What does that mean? It means, you can sign your copy of the contract and the other side can sign their copy and it counts as a single, fully executed agreement. Just be sure to have them send you a copy of the signed signature page and you send them one. Now, everyone has a fully executed copy of the agreement.
Believe me, if you spend the two minutes it takes to do this, you can save yourself thousands of dollars in litigation fees. I've got no less than thirty people I can refer you to to confirm this.
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