Michigan Business Lawyer Blog

How many times has this happened to you? You've deftly negotiated a terrific deal for your small business with a very tough adversary. The time has come to put your deal in writing. Your adversary generously offers to have his or her lawyers handle the first draft (after all he or she says, it's only the first draft, and this will save you legal fees). What do you do?

Many small business folks will accept their adversary's offer, all the while planning to have their legal counsel review the final draft, just to make sure everything "legal". But, if you're smart, you will insist that your lawyers handle preparing the first draft.

Why? Because it is well known by good business lawyers that the party who prepares the first draft of an agreement generally has better leverage in the negotiations that are sure to follow. This is because the first draft of an agreement invariably provides the framework, defines the issues, and sets the tone for what will be the final version of the agreement. When a party responds to a first draft of an agreement, their response is almost always a reaction rather than a proactive engagement of the issues.

Having your lawyer prepare the first draft of an agreement is definitely more expensive than waiting to involve them until the last minute. This is especially true when you consider that the first draft of any legal document is almost always the most difficult to prepare, and therefore, can be the most expensive part of the process in terms of legal fees. It definitely is more expensive than having your lawyer merely review a draft agreement prepared by the other side.

But, the sooner you start thinking of your legal fees in terms of expense versus cost, the better off you will be. Many small businesses try to skimp on legal fees by only involving their lawyers when absolutely necessary. But, often by the time the lawyers get involved, enough damage has been done that more is spent on fixing the problems than if the lawyers had been involved early enough to help their clients prevent the problems in the first place. It's called being penny wise and pound foolish.

Getting your legal counsel involved early in a transaction and having them prepare the first draft of important agreements wherever possible is so important in determining what the final agreement will look like. I really think you are doing yourself a true disservice if you pass up the opportunity to have your legal counsel prepare that first draft.