Transactional lawyer’s role: risk-identifier or gatekeeper?

A suitable place for a lawyer?

Transactional lawyers usually work with commercial colleagues as a team.  The lawyer’s role in that team can vary.  Is he or she primarily there:

• to advise strategically, including as to deal structures;
• to express colleagues’ commercial intentions for the deal in appropriate contract wording (to act as a scribe);
• to negotiate some or all of that wording;
• to advise on the legal implications and risks of accepting particular wording;
• to ensure, or advise on whether, the contract complies with the organisation’s legal policies; or
• to take the final decision (perhaps in conjunction with others) on whether the proposed contract terms are acceptable?

Often, the lawyer has more than one of these roles.  An in-house lawyer may have greater responsibility for corporate decision-making than an external one; in some companies, an in-house lawyer is even required to initial the final version of the contract to give approval to the terms, although it is signed on behalf of the company by someone else, usually a senior commercial executive.

The classic approach of the external lawyer is to give legal advice to the client but to be careful not to give commercial advice nor take commercial decisions on the client’s behalf.  This approach was drummed into your correspondent as a junior lawyer by his elders and betters (but the lesson was never entirely learnt).

So far, so obvious, to most transactional lawyers.  The difficulty comes when the lawyer’s role is not clearly understood by all concerned.

We recently advised a client for the first time.  The task was to review a draft contract that had already been the subject of commercial negotiations.  We did so and suggested a few changes.  The client came back, telling us that they didn’t want to make any changes, and that proposing changes could jeopardise the negotiations.  Please could we explain why we felt these changes were necessary?

Clearly, we felt the changes were useful and important.  We had already applied a filter of only suggesting important changes, as we knew that the parties were close to signature.  But now we seemed to be in a negotiation with our own client as to which of these important changes should be included.

We were happy to provide a more detailed explanation of our reasons for suggesting the changes, and even to prioritise them, if the client wanted to focus on just the top couple of points.  But what we couldn’t do is strike a deal with them as to which points to include.  If we had been involved in the negotiations, we might have formed our own views on what the other party would accept, and advised accordingly.  But this wasn’t possible as we hadn’t been instructed until now.  In fact, we had proposed wording that we thought was and looked reasonable, and would stand a good chance of being accepted if reviewed with an open mind.

Where's the lawyer gone?

The client seemed to want us to agree that the changes were not necessary, and to advise them to this effect.  This we couldn’t do.  If they had established some “red lines” of points that they required for all their contracts, we could have told them if the contract met those requirements.  If the client really wanted us to take the final decision on whether to do the deal, we could have done so (but that wasn’t likely to be the case, and our insurers wouldn’t have been happy).

If we get the opportunity to build up a relationship with this client, we will both develop a better sense of how we can work together.  At present, we are still negotiating our role.