How to keep legal expense to a minimum

In these tough economic times, no business can afford to incur avoidable expenses. And much of the time, a company’s legal expenses are just that – avoidable.

Some tips to help keep legal expenses to a minimum include:

• Avoid the courtroom: Legal actions are generally bad for business and should be a remedy of last resort. They are costly, time-consuming and disruptive – and all of this for the privilege of an uncertain outcome. Few businesses emerge from a lawsuit better off from the experience. Parties should endeavor to exhaust efforts at dispute resolution before finding themselves in the throes of litigation where costs become excessive and options more limited.

• Take the time to contract: Too many business disputes result from parties to a transaction not taking the time to document their collective expectations fully and completely. Contracts do not have to be long and complex to be effective and binding. Three rules to live by when contracting with another party: (a) if you expect to receive it, you need to make sure it’s in a signed agreement (no exceptions); (b) if you don’t understand what a contractual term means or if a document doesn’t represent your complete understanding, you should not sign it; and (c) if you do not have a written agreement signed by both parties, you need to proceed with caution, as the law may impose conditions that you did not expect or agree to.

• Confront issues early: Few legal troubles come out of nowhere. In most instances, business owners can recite a lengthy history preceding a legal problem. That history most often includes opportunities to have addressed the issue much earlier. An ongoing difficulty with a customer, employee or vendor is not likely to go away on its own. By addressing the issue at the earliest possible time – honestly and directly – a business is giving itself the best opportunity to resolve it without lengthy legal difficulty.

• Remain objective: Legal disputes are inherently emotional, but too much emotion leads to bad business decisions. Parties to a dispute too often become fixated on a perceived wrong or the need to seek justice rather than objectively evaluating their own conduct. Business owners must be honest with themselves and seek out disconfirming evidence in response to the natural tendency to blame others for their ills. Remaining objective will lead to more rational, responsible and business-focused decision making.

• Manage your legal counsel: While it seems obvious, businesses should clearly understand the scope and anticipated costs of legal work in advance of any engagement. Successful businesses do not give carte blanche to any vendor, including their legal advisers. It is reasonable for a business to negotiate cost and performance terms with its attorneys. In addition, and along the same lines, if you don’t understand the precise reason a particular course of action is recommended by legal counsel or why a matter that seems simple is being made complex, then you need to require an explanation. The law is intended to be rational in its application. If the proposed course of action seems irrational, then the work should not be authorized.

Legal expenses cannot be avoided entirely. They are an inevitable cost of doing business in a litigious world. However, businesses that take the time to manage the issues that lead to high expenses will reap higher profits for their owners.

Donald Crandlemire, a lawyer and MBA, is principal of the Crandlemire Group, Concord, which offers legal and consulting services to business and health-care organizations. He can be contacted at 603-379-6850 or Don@crandlemiregroup.com.