Monthly Archives: April 2012

What’s the Worst That Can Happen?

Improving Your Legal Health

Your legal health in contract agreementsIn any matter that will have a substantial impact on your life or livelihood, ask yourself “What is the worst thing that can happen and how do I prepare for it?” Do whatever is necessary to make this habitual. It is the first step toward your legal health. In this true story, my friend and client suffered a $1 million loss, which was worse than anything he had imagined happening to him.

I received a call from my entrepreneur client saying he needed help immediately because his company had developed a software program that had been stolen and it was going to cost the company approximately $800,000.00 over the next three to five years. His company had invested about $150,000.00 developing this software that was expected to be very popular in the theft identity/identity restoration arena. They had entered into a confidentiality and nondisclosure agreement with a nationally-known security company. His partner had worked with the security company lawyers to prepare a marketing agreement, which was related to the agreement concerning the development of the program; and the company was to be the exclusive representative of the security company to sell and distribute the software to banks. However, on a recent visit to his bank, he had seen documents which were a mirror image of the program he and his company had developed.

Unfortunately, I also learned that this company did not seek the advice of an attorney in preparing the written agreements with the national security firm. The terms and provisions of the marketing agreement were very heavily weighted in favor of the security company, whose lawyers prepared the agreements.

These gentlemen had exhausted their resources developing the software program and had no funds left to pay an attorney to seek redress. Conversely, the probability of success and the amount known to be in controversy was not sufficient to motivate a good attorney to pursue their rights and pay all expenses on a contingency fee basis. Combining the $150,000.00 they invested in development of the program with the $800,000.00 they anticipated earning during the next three to five years adds up to a total loss of about $950,000.00 — a very expensive mistake!

These entrepreneurs made two serious mistakes:

  • they did not admit to themselves that they were ignorant about the legalities of protecting themselves and
  • they “got into bed” with the other party’s attorneys and trusted them, something entrepreneurs — nor you — should ever do!

How much do you think it may have cost to employ an attorney for assistance with the legal agreements? And how much do you think that attorney’s advice would have been worth? In this case, it would have been worth a million dollars.

Admitting your ignorance of how to protect yourself is the first step towards better legal health. The next step is to never trust the other party or his attorney to protect your interest.

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