There’s nothing more expensive than a cheap lawyer.

Morrie Simkin, a securities and regs attorney at Mclaughlin & Stern (who started his career at the Securities and Exchange Commission) were recently discussing pricing and he provided the insights below. While these apply to attorneys, I’m sure you can plug in your own vendor experiences.

Morries’ Insights:

While Using the price of legal services as the key criterion in selecting lawyers is a mistake for which the client will pay.  They will get a product that does not do what they want or need it to do, or a bill that is filled with unnecessary charges.

To keep the costs down the cheap lawyer must do things that are not always in the client’s best interest.  If the transaction is a commodity type transaction—the same as every other transaction of that kind, the use of a basic form contract may be sufficient.  However, it is never so simple.  There are at least two sides to a contract.  One party or the other may raise issues, problems, propose terms or raise questions not contemplated in the form or that are at variance with the form.  To make these changes and to make sure the contract is complete and consistent takes time.  The cheap lawyer can not afford to devote the time this requires.  One example I recently saw was a partnership agreement.  One partner could remove the other only on their death, disability or conviction of a felony.  But the partners had fallen out of love, and one wanted to kick the other out.  There was a clause to remove a partner if he did not devote full time and attention to the business.  But there was no way to implement it.  Defined terms necessary to implement this clause were referenced but not defined.  It would have taken too much time for the cheap lawyer to go through the contract and make sure it was complete.

Often in a transaction the cheap lawyer does not or can not take the time to learn what it is the parties want to accomplish.  A variant of this is where the lawyer is so eager to get the assignment that he takes on matters with which he is not familiar or in areas where he is inexperienced.  The result is a cheap fee but a disaster for the parties should issues of contract interpretation or enforcement ever arise.

Another tactic that the lawyer with a too low billing rate uses is to make up in time charges what his low billing rate lacks.  He finds things to bill for—the unnecessary phone calls, the unwanted memos, the unnecessary motions or depositions in litigation, etc.  This way he has more time in the matter for which he can charge the client.

 

Sandra Holtzman teaches CEO 035: Licensing.

 

One thought on “There’s nothing more expensive than a cheap lawyer.

  1. Yeah, i guess so you’re right. There will be nothing more costly than a cheap lawyer due since man hidden charges are to revealed once you made a deal. Better have the lawyer that provides a no win, no charge service. At least you are guaranteed with a sure win.

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