Why You Need a Real Lawyer -4

 

Beware!!  Before you replace a lawyer with an internet-based “legal service” provider, consider that the results can be disastrous. What they do is provide quick forms for legal needs.  They advertise their availability on television.  They provide forms for business formation, wills, divorce, Powers of Attorney, estate plans, and more.  In the story related below, the forms were for franchises.

No doubt you’ve heard or read that Bar Associations in most states have sued most of these providers for something called the Unauthorized Practice of Law.   Unless you are a lawyer or employed in the legal field, you probably felt they were the underdog. You may have rooted for them to win.  And indeed, they are very careful in interpreting the UPL statute in each state to ensure they do not cross the line. They cannot legally provide any advice. They can only provide a form.  So they survive all challenges.  At least so far.

Their advertising portrays them as the hero trying to save the average person’s hard-earned dollars from seemingly greedy lawyers.  And frankly, Ed the entrepreneur is eating it up big time.  Use of these internet-based services is growing.

The problem is that Mike the carpenter doesn’t know when the matter requires greater finesse than these forms can provide.  And when an undesirable outcome finally shows up — often years later — it often can’t be fixed, or costs far more to fix than would have been spent originally to do it right.

Here’s the problem.  There’s no way to know in advance if the solution is inadequate, unless an actual lawyer is involved.  Later, when a lawyer must correct, or attempt to correct, the situation, he or she is bound by confidentiality and cannot reveal to the public the consequences of using such services.  So unfortunately Mike the carpenter shares all the success stories with friends and relatives, and enhances the reputation of these services.  Rarely does Mike the carpenter hear of the horror stories from others.  And those who ultimately must use a real lawyer to fix problems after the fact rarely talk about it.

So I have challenged lawyers to share some of those stories with me, without any client-identifiable information.  I will in turn publish the information.  Share it with friends, relatives and colleagues who are tempted to meet their legal needs “on the cheap” with an online service provider.

All the stories will be posted under the same title “Why You Need a Real Lawyer” so if you don’t want to subscribe, just return to the blog on occasion and look for that title in the Table of Contents.

Story #4:

A client came to me to review  a Franchise Disclosure Document (FDD ) and franchise agreement template he had purchased on the Internet and filled out so he could start selling franchises. Upon review of the proposed document, it was clear that it was fraught with issues, not the least of which was that it was quite misleading and filled with misrepresentations.

 

This was not because the client was trying to mislead or misrepresent anyone in their responses, but because the client did not have anyone to explain to him what information each disclosure was required to contain and what information it should not contain.

 

The FDD is a very regulated, highly complex document that the average person, even most attorneys, would not know how to properly complete. In addition to the potential fraud and misrepresentation claims that could be brought against the client if he used that form, the form, as completed by the client, violated federal and many state’s laws on franchising.

 

Use of that form could have been extremely costly in penalties and fines by federal and state authorities, and would have allowed each franchisee of the client to rescind the franchise agreement for failure to comply with the federal and state laws.

 

The document was a total waste of money by the client and had to be discarded.  We had to prepare a totally new document.  This cost the client money and time he spent on the template, and then the cost and time of drafting the documents from scratch with us.

3 Comments

  • By Nancy Lanard, March 11, 2015 @ 3:48 pm

    This story was my story of a true client situation. I think there are many issues with the various forms of the unlawful practice of law or using companies that sell forms to the public.

  • By Carol Luong, March 20, 2015 @ 6:42 pm

    From a client standpoint, I almost went with an online provider to incorporate my side business, but I decided against it because I wanted to make sure it was done right the first time. I’ve heard of horror stories where it ended up costing more time and money because an actual lawyer would have to fix it all up in the future anyway.

    With that said, there are definitely benefits to legal technology nowadays. Particularly, cloud-based law practice management solutions that help lawyers free up time from administrative burden so that they could spend more time helping actual clients.

  • By Ellen, May 4, 2015 @ 9:57 pm

    Thank you for weighing in, Carol. One of my clients has chosen your product for his solo practice, and is quite happy with it.

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