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Prevent Legal Problems

Prevent Legal Problems
Pat Dickson - Wed Jul 04, 2012 @ 11:39AM
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I know a lot of corporate counsel and in-house attorneys. Most of them are very good at solving legal problems. When things get messy, boy can they find the loopholes! Like no one else, they can make the arguments they need to save the day! There is always that case which splits hairs. There is that statute so indecipherable any argument can be made from it!

Most often, these attorneys are also quite adept at drafting contracts so that if there is any trouble, there is an escape clause embedded (I dare not imply "hidden") in the fine print.

prevent legal problemsOr there is a very well-drafted and tricky hold harmless and indemnity section. Oh how it puts such a limit on damages! There is nothing to fear when the nasty demand letter, complaint, or lawsuit arrives at the front door.

But sadly, these hero corporate counsel and in-house attorneys, with their fine airtight contracts, and legal arguments to save the day - no matter which way they need to sway - often neglect something very, very important.

The Ultimate Goal of Preventing Legal Problems

Now that my criticism has been stated: Just being ready and able to to fight legal problems is not enough; legal problems should be prevented. Now what? How should an in-house attorney or corporate counsel go about achieving this ultimate goal? 

I'll answer this question in the context of making sure a contract for providing a customer goods or services satisfies the ultimate goal of legal problem prevention:

1. Know Your Business: I can't tell you how many times I've dealt with in-house and corporate attorneys, and they knew very little about their own company's products, services, pricing, budget, operations, etc. When they drafted or reviewed a contract, they entirely skipped the scope of work and the statement of work. I've often heard them say, "I only deal with the legal terms and conditions, not the business details."

I mean really? How can an attorney even claim to draft or review a contract if he doesn't know how it ties into his company's financial goals? If he doesn't even know the "non-legal" business, how is he supposed to know if the contract at hand will be a success or a failure?

I'll state the question again, just for the necessary redundancy of it: If you don't know your own company's products or services, how do you know if a contract selling these products or services is going to be a success?

If you don't know what labor or equipment is available for fulfilling a contract, how can you know if the timeline or critical path in the contract will be met? If you don't know the pricing and cost structure of a contract, how do you know if the contract is likely to yield a positive margin?

So, to know your business is to know how to prevent legal problems. How? In the context of a contract, if you know your business, you are able to make sure you will be giving your customer what was promised. He'll be happy. It is as simple as that. Happy customers rarely sue. They also pay you on time and say thanks! When will we do business again?

2. Know the Details of the Deal: You have to talk to the salesperson, the operations person, and even the customer's people at times. Talk to everyone involved, until you know all the details. What exactly was the deal? How does it differ from other agreements? What is different with this deal, as opposed to  the others you've made? What are the expectations on both sides? Do your people and the customer's people agree on all the critical points? What is being sold? How much? When is it to be delivered? Are any custom made products going to be required? Are they included in the pricing? You get the point.

It is your job, as an in-house attorney or general counsel, to prevent legal problems. So in the context of a contract, can you now see how important it is to clearly spell out the parties' expectations in the contract, before it leaves your desk for final signature? If your contract puts everyone on the same page, with all the specifics of the deal spelled out, the risk of encountering future legal problems is substantially reduced. 

3. Regularly Contact the Customer: You gave the contract your blessing. But your job isn't over when the contract is signed. It is also your job to make sure your customer is happy with your company's performance under the contract. This is pretty easy to do. Just call your customer regularly, and ask him if everything is going smoothly. He'll often tell you things your own people won't. I can't tell you how many times regular contact with the customer has prevented legal problems in my practice. And sometimes, because I was in regular contact, customers have called and placed additional orders through me! My regular attention made me their trusted go-to guy.

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