Thankfully, a New York court has held that the following provision in a retainer agreement is unenforceable:

"If client fails to pay for charges due under this
agreement and the law firm takes legal action and is awarded such
charges, client shall owe to law firm costs, expenses and attorneys’
fees (including but not limited to the reasonable value of the law
firm’s own work) attributable to law firm’s collection proceedings
and/or action."

The court found the provision "to be fundamentally unfair and unreasonable."

"Aside from its lack of mutuality, the clause, even if not so designed,
has the distinct potential for silencing a client’s complaint about
fees for fear of retaliation for the nonpayment of even unreasonable
fees"

Well, I couldn’t agree more.  If you see that kind of language in your retainer agreement, walk away from that attorney or law firm.

A little background knowledge to take away:

In New York,  attorneys are required to enter into a written agreement with their clients setting forth the important points of the attorney – client relationship, a so called Retainer Agreement or Letter of Engagement.  That is good a good thing, because your attorney is the last person you want to engage in a "he said, she said" kind of argument.  (There are exceptions: fees expected to be less than $3000; client already hired attorney on similar matter; for more info on the rule look here.)  But, outrageous provisions like the one above should not be part of a retainer agreement.

For more commentary on the case look here.

Since I am in the business of memorializing deals for people, my repeated message of "get it in writing" might seem somewhat self-serving.  Thankfully, non-lawyers point it out too:  Lema Korshid on Mindpetals had a post yesterday entitled "Memorialize that Deal in Writing."  She writes:

Entrepreneurs, save yourselves from future headaches! Ask your
attorney draw up a contract immediately after the “toast” or the
“handshake”. I understand it is one more step and it costs money. But,
it is a necessary step that you should take very seriously because it
ensures that both parties are aware of their rights and obligations and
provides a remedy if either one of them does not honor the terms.

By the way, while oral agreements are generally enforceable in New York (if you can show what you agreed to), there are some important exceptions.   For certain types of agreements, New York’s so called Statute of Fraud requires a writing to make your deal enforceable in court.

Some of these agreements are:

Agreements which cannot be performed within one year from the making thereof; Guaranty Agreements; Agreements to compensate business brokers (See New York General Obligations Law Section 5-701).

Agreements for the sale of personal property over $5000 other than goods, securities and security agreements  (See New York Uniform Commercial Code Section 1-206).

Agreements for the sale of goods over $500 (See New York Uniform Commercial Code Section 2-201).

If you need help with memorializing deals in writing, contact a licenses small business attorney in your area.

A former employee taking customers from a business after having left the company’s employ is many business owner’s nightmare.  Thus, many businesses try to prevent their employees from competing with them during and even after the employment relationship has ended.   The solution seems simple: make  the employee sign a non compete agreement that prevents him or her from ever competing with the business.  Well, it ain’t so easy.

Read more

My post on September 14 talked about conflict resolution and the resources available at the American Arbitration Association. 

In the meantime, I discovered another great resource for domestic and international arbitration issues:  Lovell’s International Arbitration Guide.  This site offers extensive information about arbitration, even  a drafting engine that automatically drafts an arbitration provision for you!

The site is free, but you have to register.  Hey, there is nothing wrong with using Big Firm resources without hiring them.

Many lawyers draft contracts that are too long, too complex, and just badly written. Bad agreements are hard to eradicate, because everybody copies everybody else without thinking twice about it.

Agreements should be easy to read and should make sense from a legal and logical perspective.

Fortunately, Ken Adams and his blog have come to the rescue. In one of his recent posts, Ken discusses the common use of "for the avoidance of doubt."

Read more

Once you know there will be a written agreement, someone has to draft it.  Should it be your lawyer or the other party’s lawyer?

Some say make your lawyer insist on preparing the first draft.  I tend to agree with that.  It gives you the opportunity to set the stage for later negotiations and control the language of the agreement.  Whether he or she will suceed with that request depends on which of the parties has more bargaining power and whether the other side sees an advantage in preparing the first draft.  If you are the party for whom most of the protections of the agreement are designed, for example a buyer in a purchase agreement or a lender in a loan agreement, you could argue that this fact alone should let your lawyer be the first drafter.

I think in many cases it is shortsighted to be afraid of the attorney’s fees for the first draft and subsequent revisions.  In my experience, marking up a bad draft and checking on revisions often takes longer than drafting the whole thing in the first place.  In particular, because your attorney should have pretty good samples to start with and thereby minimize the time to produce a good first draft.

Of course, sometimes it is just a matter of who was faster to seize the opportunity.  A seller may present you with a draft very early in the negotiations and thereby make it harder to insist on a complete redraft.