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Anyone who owns a business trusts their attorney to give them solid legal counsel before proceeding with a deal. But the advice may end up being bad, resulting in disadvantageous terms, lost profits, and even unexpected liability. The law does not require lawyers to be perfect or to never give advice that might turn out to have negative consequences. Still, there are situations in which bad advice crosses the line into legal malpractice. Stanfield Bechtel Law explores what business owners should know about their rights.
Examples of Bad Business Advice
If you have a pending business transaction, you probably want your lawyer involved in the deal to make sure it turns out the way you expect it to. Some examples of bad advice pertaining to business deals include:
- Failure to conduct due diligence on the company with which the deal is being made
- Failure to fully investigate and independently check the underlying facts of the deal
- Misinterpreting applicable laws or court opinions and how they might affect the deal
- Failure to advise the client to secure necessary permits, licenses, certifications, or other legal requirements that attend the deal
- Failure to advise the client as to likely tax implications of the transaction
- Mistakes concerning contracts and other paperwork
- Not using written contracts
- Failure to use confidentiality agreements to protect sensitive information
All of these could end up giving the client a bad deal that might cost substantial sums of money, result in legal problems like fines and court damages, or simply land the client with disfavorable terms that could have been better with more competent counsel.
When Does Bad Business Advice Constitute Malpractice?
The next question is central to the matter: if you have received bad advice on a business deal, does that mean the lawyer committed malpractice? It should be stressed that merely ending up with a deal that was less than you hoped for is likely not enough to be malpractice. There is always an element of risk when entering a deal, and you could be faced with unexpected problems that even the best lawyer could not have anticipated and prevented.
The key issue is not whether the lawyer made mistakes but whether the mistakes were unreasonable in light of the circumstances. Some indications of this might include:
- The lawyer was incompetent to handle the deal, lacking experience with the industry or subject matter of the transaction
- The lawyer did not take the time necessary to conduct due diligence or a thorough examination of the facts
- The lawyer should have sought third-party counsel (for example, speaking with a tax professional) before giving you advice
- Easily avoidable errors were included or overlooked in contracts and other paperwork
- The lawyer did not ask enough questions or gather enough details about the deal before giving advice
- Incorrect legal authority was cited in rendering the bad advice
These are only a few indications that the lawyer not only failed to provide good counsel but did so because of a failure to abide by the duty of care lawyers owe their clients. This duty of care includes putting the client’s interests first, acting with competence, and much more. Any act or omission that detracts from the lawyer’s duty of care could be considered malpractice.
Seeking Damages After Legal Malpractice
If you are able to establish that your lawyer gave you bad advice in your business deal, you may be able to seek compensation by filing a legal malpractice lawsuit. Evaluating the amount of damages you are owed will depend on the specific facts of your case, but our law firm will work for a court judgment or settlement that fairly compensates you for your losses. Get started with Stanfield Bechtel Law today.