Monday, 4 February 2013

On Drafting and Roles of Legal Advisors

I have recently been engaged in discussions on the proper way of drafting contracts. As I personally have been engaged in patent and technology litigations, I often tend to take a dispute-oriented approach to contract drafting. For example, I consider the ramifications of the contract being argued in court, who would have the burden of proof, whether I make a legal compromise by inserting intentionally vague provisions (would it be interpreted to our benefit or not), and so forth.

However, there is also another realm, which can be qualified as a “deal-lawyer-type” of contract drafting, where the main focus is to get the deal through one way or another. Here the issue is already somewhat different: you may be limited by time or expenses or you may have an opportunity to identify only some of the issues that you consider as the greatest deal-breakers in the deal.

An excellent example of these distinctions between different drafting types can be found in patent licensing with its carrot and stick licensing approaches. In the former the licensor voluntarily grants a license and enters into a commercial relationship while, in the latter, the patent holder threatens to sue the licensee for patent infringement if the licensee does not pay for a license. It is very likely that in the latter case, the agreement would, at some point, be tested in court so you should be careful when drafting, keeping the forthcoming litigation constantly in mind.

However, when talking about handling an assignment it is not only about how we draft agreements but what is our scope and role as advisors in overall. Steven M. Davidoff, professor at the Michael E. Moritz College of Law at Ohio State University, recently posted lessons from a collapsed deal involving Goldman Sachs, which was in a legal dispute over its role as the advisor in the sale of the speech recognition company Dragon System.

While I fully agree with what one commentator said, that there is only one thing that is more dangerous to an M&A client than inexperienced bankers and lawyers and that is “...if the client reckons himself smarter or better at doing deals than the bankers and lawyers who are being paid to advise him/her.” It is not very often than people with legal education do have the business acumen to create also “commercial win-win deals” for their clients. That “weak spot” should perhaps be the target of the personal development of all us lawyers to make us also more solution-oriented and to make the claim “if the world were full of lawyers, there would be no deals executed” less true.

Take a couple of minutes and read this through as this outlines the importance communicating the working methods and scope clearly – to ensure that the clients’ expectations are met. And yet, in this case, it still might not have been enough…

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