Do lawyers get in the way ?
LEGALLY SPEAKING
originally published October 5, 2011
By Robert G. Ricco, Esq.,
practicing in New Jersey, New York and Florida
(201)-961-2142
Do Lawyers get in the way of making a good deal?
I have heard it said that lawyers can ruin a good dream when it comes to a business deal. Getting bogged down in too many details, and telling you what you can and can’t do, and generally hamstringing the whole process. The truth is, a good deal will only be better in the long run if a lawyer who knows what he is doing has a hand in crafting the deal. Why is that? When you make a deal, say buying a restaurant, selling a building, forming a partnership, the written details are what keeps everybody in line.
At a future time, whether it be friends, family, or whomever, the parties to the deal will recall the details in a slightly different way. That can lead to disagreements over how the money gets split up, or who is responsible for what. If the parties can’t agree, or those details are not spelled out, that once viable businesses can whither on the vine. Also, it helps for a lawyer who has experience to anticipate the problems that usually arise in a business, and pre-plan for those contingencies right in the terms of the deal.
One way to look at a business deal is that it really is a polite litigation, where both sides agree ahead of time what to do if the business goes up or down, and one party wants out, or if they can’t agree. The more thought goes into the deal, the less likely the parties waste money later on attorneys fees in a court battle.
I have had clients who invested monies on little more than a handshake, relying on the friendship that bound them to their business partner or entrepreneur friend. But the world is a perilous place for angel investors without ironclad contracts. If the business sinks, the entrepreneur who accepted the capital influx will claim it was an investment, not a loan, and as such the investor is out of luck. If the business takes off, the entrepreneur will say he was a mere borrower, and that he owes no portion of his new found wealth to his one time friend, and will proclaim that he only owes back the loan with interest, or maybe just a return of capital. I have fixed some problems like this after the fact, but its much harder to negotiate a deal to, in effect, correct a contract on the court house steps. Had the deal been made properly at the time of investment, a good deal of grief would have been avoided later.
This column is not intended to be a comprehensive summary of recent developments in the law nor is it intended to provide legal advice or to render a legal opinion. Readers are advised to consult their own attorney for legal advice.