How can you save money on your legal fees?

Tip number 1 - Don’t use lawyers at allIt is possible for projects to be successfully procured without the use of external lawyers, for example where:·        

• The project is of low value and simple in nature; or·        
• The employer is a residential occupier; or a sophisticated employer with in house expertise; or·        
• The parties are not contracting at arms length.

You might use a standard forms, or agree a scope of works and price on the basis of, a simple specification, a quote and a “handshake”.

The upsides are pretty simple – you save money, cut down the paperwork and speed up the project by focussing on delivery.

And for most simple projects, there should be no problem.

But it is on the bigger, more complex projects that problems can arise.:-

• Differences of opinion between the parties will arise, maybe over the specification, or what was included in the price. On small projects, a chat onsite should sort it out. But the absence of a clear written contract means more complex queries are harder to resolve, and may lead to disagreement. Remember, the test the courts use in interpreting what your contract says, is not what you think it means, but what the objective “reasonable man” thinks it means. 
• These “disagreements” may end up in court – and if there is no paperwork to evidence what was agreed, a court may decide there was no “contract” between the parties at all. This leads to all sorts of complications in terms of ensuring completion on time, on budget, and to specification, and getting paid. Its likely neither party will get what they want. And of course, if you do end up in court, you may then need a lawyer to help you, so you have lost your initial saving on legal costs and you will also find yourself having to commit time to the resolution process.
• 28 day Adjudication (the swift dispute resolution procedure for construction contracts) is currently unavailable unless there is a written qualifying contract. 
• Trying to use un-amended standard forms is fine for many smaller projects, but they are less suitable for more complex construction or engineering projects with multiple stakeholders. The forms will require amendment and care must be exercised to ensure what is required is accurately reflected.

• provide only selected clauses or extracts of an agreement for checking; or
• give limited instructions (“give me a clause which deals with X scenario for me to insert into my contract”); or
• provide brief background information only; or 
• impose a very short time limit on advice.

A scenario we often see is where an employer is about to permit a contractor to take possession of site (usually tomorrow) but want to issue a Letter of Intent to permit say steel ordering, and enabling works to get underway. We are asked to confirm the Letter of Intent is “okay”. Given the time limit, there is no chance for us to re-negotiate and there is little practical advice we can provide.

There are some advantages in this approach, and it can work in certain circumstances – but in our experience, these tend to be where we are assisting an experienced party, or in-house counsel.

The downsides are more subtle. 

On complex development, construction or engineering projects for example, numerous parties with various inter-relationships have competing or similar interests in or obligations to the project and/or each other.   These relationships are usually documented, with obligations and risks are shared appropriately and passed to the party best equipped to deal with them. So advice on the terms in one document, may be impacted by other documents, or other parties. A lack of complete advice could pose real commercial risk. Advice on design risk in a Building Contract for example, may need to be considered in the light of the design team appointments, and any warranties available.

It is almost impossible for us to re-negotiate a document if parties have already spent a long time negotiating it themselves, and then pass it to us for a “once over”.

So if not using lawyers at all could in fact lead to additional legal costs, and only using lawyers on piecemeal basis could also lead to additional legal costs, what are our tips for keeping your legal fees down yet still getting the best out of your lawyers?

Use your lawyer intelligently - it is not difficult!

• Make sure your lawyer knows and understand your business generally, and your project pipeline in particular. 
• If you regularly need construction documents, get your lawyer to prepare standard documents based on what you and your projects usually need so that you can use these on your future projects. This can include amendments to the industry form Building Contracts that you use; consultants’ appointments; sub-contractors’ appointments; collateral warranties; novation agreements; parent company guarantees or bonds.
• Make sure your drafts are checked and updated for any site specific issues before each project
• Issue your draft construction documentation to parties at tender, perhaps with a proviso that comments or negotiation will not be accepted. It is better to alert your team to contract terms from the outset so they can price accordingly. You will find tender prices can be more easily compared too.
• Agree and instruct your lawyer early as to how to deal with any comments or negotiations arising. . 
• Use your Project Manager/Employer’s Agent as much as you can. They have the best knowledge of the overall team and can help with collating information, circulation of documents and the collation of comments.

•  have been issuing standard documentation to our clients for many years and we do so on a fixed fee basis. Drafts are developed to suit our particular clients’ requirements in terms of risk sharing, and these documents equip our clients to manage the procurement process themselves, with significant risk reduction;
• agree the fee basis for negotiations – if agreed we will handle them. We try to equip our clients to handle most negotiations themselves;
• can do a fixed price health check to make sure that all the correct contract documentation is completed and incorporated, and that parties are signing the documents in the correct way;
• always use a comprehensive scoping questionnaire when we take your initial instructions; and
• send checklists to help our clients collate necessary documentation to ensure that when they provide us with their initial instructions, these are supported by relevant paperwork.

Although this means an investment in some legal advice at the outset, our experience shows that this investment reaps long term rewards in relation to risk reduction, and reduced disputes. We have been working with some of the biggest regional players in the construction business with the aim of helping our clients help themselves and we want to share our experiences with you.

We want to help you help yourselves in the challenging environment of construction and engineering. And hopefully this note helps a bit. But if you have any queries arising out of this note, please do not hesitate to contact Thomas Jacobs, Partner and Head of our Construction and Engineering Team.

The contents of this newsletter does not constitute legal advice and you should not do or refrain from doing anything based upon the contents of the newsletter and should, in all circumstances, seek full and comprehensive legal advice.

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