Ohio Practical Business Lawyer & Attorney : Teri Rasmussen : Lane Alton & Horst Law Firm : Commercial Law, Creditors, Business Formation : Columbus, Central Ohio

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Nina Kauffman over at the Making It Legal blog just wrote a terrific post using an object lesson to explain exactly why deciding to go forward in a deal "without getting lawyers involved" isn't always the bargain cost-saver envisioned.  Long story short, the "victim" aka buyer didn't ask to see financials, didn't verify the arrangements existing with the landlord, and didn't verify the seller's ownership interest before swapping her hard earned money for a business that turned out not to be the cash cow promised by the seller.  Now she has discovered that the consequences of trying to save money by keeping lawyers out of the transaction are neither pleasant nor inexpensive.

While it is certainly true that this erstwhile buyer could have done all these things without a lawyer and perhaps avoided her unfortunate fate, using a lawyer to assist with the purchase of a business minimizes the likelihood that an important detail pertinent to whether you even want the business will be overlooked.  It can also ensure that the deal is structured in the manner which is most advantageous to you from a tax and basic business perspective.  Although many deals do proceed without a hitch with nary a lawyer in sight, the only one which really matters to you is the one you're doing.  So it all comes down to how much of a gambler you really are; if you're lucky, all will be well, but if you're not, the results can be far more devastating than just a minor disappointment in the road of life.   

Business people sometimes think they can substitute the form documents easily available on the internet, or in self-help books found in the local retail book store or on Amazon, for a trip to the lawyer.  I certainly understand the motivation behind hoping the form downloaded for free will work just fine if you change names, dates, and maybe a few other things.  On my Blogroll, I have even included some websites with what I consider to be generally dynamite forms.  Forms, however, must be utilized responsibly.   

Unfortunately, making sure you have the right document and the right language for your particular situation is very much like making sure you have the right tool for the job when it comes to home repair or any other task.  If you need a screwdriver,  trying to use a hammer is unlikely to lead to optimum results.  To get a flavor for this, check out Ken Adams of the Adams Drafting blog which focuses on all the different ways subtle variances in the language used can change meaning significantly.  Lawyers have the education and experience to understand and make the proper choices.  Do you?  

Forms are a Jumping Off Point, Not the Destination.  Forms are just that - forms.  They are merely a place to start to save the time and expense of drafting from scratch on every occasion.  When I download forms or entire documents used in actual deals from oncle or docstoc, or Findlaw, or anywhere else (and I do that a lot), I rarely, if ever, use them in exactly the same form as downloaded. 

I use downloaded forms as a skeleton to be fleshed out by language from other forms and documents, together with specific language and provisions pertinent to the particular deal that I create myself.  I also delete significant portions of the document downloaded as not relevant or appropriate for the deal before me.  While many deals may be similar, every transaction really is just enough different to require some tailoring of draft documents at my disposal.

Why doesn't the same document work in every deal?  Why can't you just use the lease or Asset Purchase Agreement your buddy got his lawyer to draft or you found on the internet? 

For starters, contract, employment, and especially real estate, law differs in important ways from state to state.  New York may require certain language not necessarily favorable to employers that Ohio does not and which an employer in Ohio may not wish to include at all.  Each state's courts may have reached slightly different interpretations of certain legal concepts and principles which can affect the meaning, and sometimes even the validity, of particular contracts.  Do you as a business person really want to spend the time to determine if the document you got from your friend in Michigan is really going to work the same way here in Ohio?  An Ohio lawyer already knows these details and understands how to apply them to your Ohio transaction.

In addition, documents drafted from the perspective of one party to the transaction are generally not as beneficial to the other.  For example, from a landlord's perspective, there are certain provisions in a lease that should be included which the tenant would prefer to leave out.   Even if you are using a form from "your side", your bargaining position may be different from that of the original party in that position.  While it is theoretically possible to draft a contract or other document neutrally so that it is completely "fair" to both sides, in reality, contracts are generally written in such a way to benefit one side somewhat more than the other.  How great the disparity is often a function of the relative bargaining position of the parties.  An attorney is able to assess your role (and relative leverage) in the transaction and determine the most appropriate language to be used as a consequence.  

• EXAMPLE from an Asset Purchase Agreement - Compare the following three ways of describing the assets being purchased, each of which has a slightly different meaning.  Choosing the right version for your particular deal is crucial.  Having a lawyer on your side can help.

The purchased assets being acquired by the Buyer as a result of this Agreement and the transactions contemplated hereby shall be acquired by the Buyer on an "AS IS, WHERE IS" basis and in their then present condition, and Buyer shall rely solely upon its own examination thereof.

Except as set forth on Schedule 3.5, [to the best of Seller's knowledge and belief], the Assets, including all machinery and equipment, are in good state of repair, in sound operating condition, ordinary wear and tear excepted, and have been given regular maintenance in the ordinary course of business.  

[To the best of Seller's knowledge], All of the facilities of the Seller and its equipment and other tangible assets are in good condition and repair (ordinary wear and tear excepted) and workable, usable, and adequate for the uses to which they have been put by the Seller in the ordinary course of business, and none of such facilities, equipment, or other tangible assets (exclusive of obsolete items no longer used in the Seller's business) is in need of other than routine maintenance or repair

The Ohio State Bar Association also offers some additional considerations why consulting an attorney can be helpful.  Among other advantages is the confidentiality afforded by the attorney-client privilege which may not exist to the same extent with other professionals such as CPAs. 

For some similar thoughts along the same vein with links to still others making the same point, visit Rush Night's posting on the subject on his Rush on Business Blog.

A Final Point.  Some clients think they're helping me by bringing me someone else's form to "fix" for their deal.  Mostly, you're NOT, helping me that is.  I DO have my own forms that I'm used to and know how to tailor to your deal; it will probably take me longer, not less time, to use the form you bring me than my own form.  This is because I already know where I've put certain important language and the sections that typically require modification from one deal to the next; with someone else's form I have to read it especially carefully to make sure it has the same provisions.  It's a little like finding your way to the bathroom in the dark in the middle of the night; most of us can navigate this journey just fine in our own home, but may have difficulty when staying as a guest somewhere unfamilar.

So that's my little commercial on how I and other lawyers actually do add value to your business transaction.  Can a business person get to the same place without a lawyer?  Sure, but if you really wanted to know that much about the Law, you'd probably have gone to law school in the first place.