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.

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.

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.

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.

You Get What You Give

So, let's suppose you don't have a regular relationship with some business that would allow you imply the existence of a contract. Suppose you are the same widget seller you were yesterday.

Also suppose that Company A said it had a great opportunity to build a Whatchamacallit if only it had 5,000 widgets. So, being the savvy businessman you are, you send over 5,000 widgets with the idea that you will get paid for them. Because of the urgency surrounding the need for the widgets, there are no contracts, purchase orders, invoices or shipping documents. And then guess what? Company A doesn't send you the money for the widgets.

What now? Are you out of luck?

Nope. Believe it or not, even this lack of an express document to protect your rights still has some protection for you - and maybe even more. In Florida, you have a cause of action for unjust enrichment. Essentially, if you confer a benefit on someone and they knowingly accept it (the widgets), you get to recover the value of the benefit. When supplying products and goods, this is almost always the ordinary sales price. So, in our example, you would be able to claim that the ordinary sales price was the value of the benefit conferred and that's the amount that Company A should pay to you. Nice, eh?

What I find a little spookier is this weird twist that can sometimes allow you to recover more. This actually happened to me. I was representing a company who was sued by an intermediary claiming that he helped my client form a valuable distributor relationship and as a result of his introduction, my client was greatly enhanced. We argued that there was no contract to pay this intermediary and, in fact, we had proof of our failed contractual negotiations. By the way, under the proposed contract, the intermediary would have received $100,000 for putting the parties together. So, despite the lack of a contract, the intermediary sued and claimed unjust enrichment. Guess what? He was able to show that the value of his benefit exceeded $200,000 - and he was awarded that amount. That's a pretty insane result for a situation wherein the intermediary was unable to negotiate a contract. Instead, equity was his best friend. But, please, that's a one in a thousand scenario and should not justify you foregoing the sanctity of reducing your business relations to writing whenever possible. It's just an unusual story and one that illustrates the example of unjust enrichment's potential quirkiness.

What Are You Implying?

Last week, before the financial world fell down all around us, I promised to "talk" about your rights in those situations involving something other than a written contract. What if, for instance, you do business with Company A over and over again. For weeks, months or years, you sell "widgets" to Company A at a price of $2.50 a piece, you buy 1000 at a time and Company A pays within 30 days of delivery.

As a regular practice between you and Company A, a series of norms and expectations has developed. It is reasonable to expect that you will need to make provision for having a 1000 widgets in your inventory every week, month or year for Company A. It is also reasonable to expect that Company A will place its regular order and that you will sell the widget for $2.50. It is also reasonable to expect that you will be paid within thirty days.

Although the law does not view this as a preferred method of doing business, you do appear to be in a situation in which the law could find that you had a contract implied in fact. Correct - a contractual existence implied by the facts of your relationship with Company A. It's a little more costly and time consuming to prove than a clean, written contract that plainly states the terms of the parties' relationship, but it can be done.

Now, before you run off thinking you can save a fortune by skipping out on written contracts or forms, bear in mind a few things. First, a contract implied in fact only exists to the extent that the potential terms can actually be proven. Second, such a contract will only have the "essential" terms (price, quantity, delivery). The details and caveats that can afford you greater protection if you negotiate for their inclusion are not made part of an implied contract. Third, any dispute over the terms of an implied contract is likely to be more protracted, simply because there are no written, regular terms for the parties to rely on and be governed by.

The fun continues tomorrow.

Jane, Stop This Crazy Thing!

For those of you that did not catch my reference to the Jetsons made in the title, I am changing my intended discussion about implied contractual theories to a quick point about the stock markets and banks.

For those of you holding accounts at banks, your money is insured up to $100,000. If you have more than $100,000 at any bank in any one account, I applaud you. For those of you have trusts at a bank, the beneficiaries of the trust account are EACH insured up to $100,000. They do not have to split a $100,000 FIDC insurance payment amongst themselves.

If you have SIPC-insured accounts (as opposed to ordinary bank accounts backed by the FIDC), you are insured up $300,000.

Now, let's just hope that you do not need any of this information and it becomes useful only for cocktail party conversation. Keep your eyes and ears open and hope that the Congress can get together to reach a deal. While many perceive a proposed bailout as paying off Wall Street, we need to also keep in mind that without AIG, Fannie Mae or Freddie Mac, nearly half of the homeowners in this country will not qualify for a mortgage or any other type loan/credit arrangement. That's a staggering potential loss to the economy, one which many of the talking heads say this country would not recover from in our lifetimes and would move the center of the financial markets away from New York and to the European or Asian exchanges. Imagine, if you will.