There is a reason lawyers are called counselors. They counsel people.
Too often clients use a lawyer after a problem arises. Clients then expect their lawyer to clean up whatever mess the client or some evil doer created. This is a very costly and inefficient way to use a lawyer’s services.
Within the world of business transactions and contract negotiation, a client’s failure to consult a lawyer before signing on the proverbial dotted line can prove fatal. Here are the top five reasons a person should have a lawyer review a contract before signing it.
- Better Courtroom Outcomes. Courts of law will not consider any other evidence of a contractual relationship other than the contract. The parole evidence rule prohibits the use of outside evidence to enlighten a court or a jury regarding the entire business relationship involved. For example, a person interviews for a new job and is hired. Terrific! The new hire is understandably excited. As part of his or her employment, the employer requires the new hire to sign a covenant not to compete. During the interview for employment, the interviewer states to the candidate “don’t worry about reviewing it, I promise you this company never enforces these things” The new hire in their elated state signs off on an agreement they never bothered to read let alone have an attorney look at it. Under the parole evidence rule, the interview and the circumstance is inadmissible evidence. Evidence that would help this new hire defend or prosecute a lawsuit. Hiring a lawyer to review before signing insures that the contents of a contract are not too punitive and are as favorable as possible to the client.
- Better Contract Terms. Having a lawyer involved in the contract review process increases the likelihood that a contract negotiation will occur. Many large companies have in-house lawyers. If a person is asked to sign a contract but insists that his or her lawyer first review the contract, then there is an increased likelihood that the company will negotiate the terms of the contract. This process will result in a contract with terms that are more favorable to that person.
- Understanding the Contract. Even if the contract cannot be negotiated, having a lawyer review it will educate the client as to the true meaning and scope of the document. The client can then adjust his or her behavior to avoid inadvertent breaches. For example, if a client signs a employment contract containing a 100 mile radius covenant not to compete but the client is unaware of such a restriction, he or she may inadvertently breach the covenant. Companies routinely sue former employees who have taken new positions with competitors claiming damages arising from the former employee’s job change. However, if the client is advised of this geographic restriction he or she will be fully informed and will adjust their job search accordingly.
- Lower Legal Costs. The time involved with reviewing and possibly negotiating a contract is a small fraction of the amount of time a lawyer will spend defending or prosecuting a lawsuit involving a breach of contract claim.
- Education. Getting in the habit of using a lawyer to review a contract helps a person learn about contract law. Lawyer consultations educate clients regarding hold harmless, indemnification, jurisdiction, venue and liquidated damage provisions in a contract that can be traps. Using a lawyer as an educator is much better and less stressful than using one as a savior.