Drowning in Legal Paperwork?
In his latest article, David Heys explores the importance of properly drafted legal paperwork and shares some of his experiences that highlight the risks of cutting corners.
A legal agreement is a bit like a life jacket – you only find out if it is any good until really need to rely on it.
And like a life jacket, what saves you is not the thing itself but the quality of it and the way it is used. Sadly, the current economic climate means businesses are facing hard times, they are struggling to honour their commitments and as result are being met with some difficult decisions. Further, when businesses are tightening their belts instructing a lawyer can be seen as (and sometimes is) an extravagance, especially when so many legal documents are available on the internet at the fraction of the price.
Should you use legal documents available on the Internet?
Many of these legal documents are well drafted and perfectly acceptable. The problem is, just as a life jacket has to be the right size and fastened correctly, a legal document has to be the right one for the intended purpose and must be used in properly. Getting it wrong is the equivalent of tying the life jacket around your legs and hoping it will keep your head above water.
The first problem with internet legal documents is that it is difficult to pick the right one (there are literally dozens of leases and shareholder agreements to choose from online). The second problem is that, having selected the document, people then start ‘tweaking’ it which can leave businesses without the level of protection they thought they were getting and with additional problems for the future.
The importance of correctly drafted legal paperwork
A further issue we see is the increasing number of businesses not bothering with legal documents (even from the internet). Instead, they cobble together a ‘back of a fag packet’ version and hope for the best.
Whether using internet agreements or their own versions, often businesses simply don’t realise the extent of the risks they are taking. To continue the water analogy, you should always know the depth of the water and the strength of the current before jumping in. A well fitted life jacket might be fine in the local river but you wouldn’t use it to cross the Atlantic.
A couple of recent examples include:-
A client came to us with a scrap of paper he had signed saying he would sell his industrial unit. The paper had all the requirements of a binding contract. When he decided to walk away because this was a bad deal the buyer threatened to sue him. We managed to get out client out of this and save his property worth £400,000.
A client sold shares in his company using a shareholder agreement which he downloaded from the internet and then altered. The result is that our client has lost control of his company and now cannot get out of the agreement.
The benefits of instructing a lawyer to oversee the creation of legal paperwork
A good business solicitor will not only prepare the right documents but will also look at the transaction as a whole and how it fits in with your business. They will explain the risks you are taking and help you to manage those risks by putting together a ‘Plan B’ in case things go wrong. Of course, good lawyers aren’t cheap but most will give some free initial advice. This also enables them to assess how best they can help you and solicitors carry professional indemnity insurance.
To help you navigate through the choppy waters of business and choose the right legal documents that are fit for purpose, here are my fail-safe tips to remember when entering into any legal arrangement: -
Write down everything that you expect from the agreement i.e. what you will (and won’t) do, what you will be paid or receive and the same for the other party. By doing this it will help you identify possible misunderstandings and therefore risk areas.
Do not sign anything without some sort of legal advice
Try to work out what could go wrong – there might be more than you think (remember you don’t know what you don’t know!)
Legal support from Lawson-West Solicitors
We appreciate it can be difficult to navigate your way through all of the legal requirements of creating and amending the necessary paperwork. For more information or help with your legal documents please call David Heys on 0116 212 1027.
David Heys is Managing Director and head of Commercial Law at Lawson-West Solicitiors.
With offices in Leicester, Market Harborough and Wigston you can arrange an initial meeting with us to find out how we can help you with Parental Contact, Collaborative Law, Divorce or Separation.
These notes are intended as general guidance only and should not be relied on in any specific circumstances without additional specialist legal adviceView all