What Exactly Is Contract Review?
Contract review is a service that is provided by a law firm. A skilled civil or transactional attorney looks through an existing contract, such as a Real Estate Purchase and Sale Contract, or an employment agreement. Contract review entails assessing who the parties are in the agreement, and identifying the clauses that are most likely to impact the parties in the future. Reviewing a contract means to assess the risks involved with each party’s obligations and rights. A typical example of a contract review would be to have a real estate attorney look over a purchase and sale contract before you sign it. This is important because there could be hidden fees circumscribed in your agreement.
Another example would be to have a civil litigation attorney look over a contract. There might be clauses in the contract that prevent either party from suing, or limit the types of damages that can be awarded in a lawsuit . A contract review would entail an attorney looking for these sorts of provisions, and advising you on what your risk is. If you don’t understand your risks, you might be taken advantage of, or otherwise unwittingly bound to the terms of the contract.
Most people do not even realize when they are looking at an adhesion contract. An adhesion contract is a contract that is signed "as is". An example would be a lease agreement. When you rent an apartment, you’re not going to be able to negotiate to change any of the terms within. You essentially have to either take it or leave it. That is the nature of an adhesion contract. So it would be wise to have a lease agreement reviewed beforehand as to the provisions contained within and if they are in compliance with the law of the state.
A breach of a contract is a violation of an agreement and can have a substantial impact on the parties. Having a contract reviewed beforehand can help avoid having to deal with some potentially costly issues down the line.
Contract Review Factors
There are several factors that can influence the cost of reviewing a contract. One important aspect to consider is the complexity of the contract itself. A straight forward agreement may take an hour or two to review with the attorney, while a complex agreement, whether it has numerous complex legal issues and/or a complex payment structure, can take many hours to review with the attorney.
The experience of the Attorney: An attorney that has extensive experience in a particular area can assist you at a lower cost than an inexperienced attorney that lacks specific industry experience. While some attorneys may offer free consultations, other attorneys will charge an hourly fee. More experienced attorneys often use their experience to offer flat fees rather than hourly fees, as this allows them to offer you predictable costs.
The location of the attorney: In general, an attorney’s hourly rate will be customary to the geographical area of their practice. As a generalist law firm, we have very reasonable rates for attorneys licensed throughout the United States and therefore our clients do not pay a premium simply based on our location. Further, our fees are reasonable even in major metropolitan areas throughout the US.
Urgency of contract review: If a contract has very poor timing, an attorney cannot fairly allocate blame for a misstep to you, then perhaps a premium should be offered for last minute contract review. In emergency situations, you need to secure legal representation quickly. If there is an emergency, prices can be put on hold until your contract is perfected. Most attorneys will work this way, but you need to know that there can be only one person who acts without legal counsel.
How Much Does Contract Review Typically Cost?
The average cost of a standard 15 page contract review is between $400 and $600, which includes reviewing and editing the agreement and providing a list of questions and comments to discuss with the client. Hourly rates for contract review fall anywhere between $200 and $500 per hour. The price will depend on the type of contract, its complexity and the type of lawyer you choose – whether it be a solo practitioner, a member of a small firm or an individual from one of the large law firms.
Some examples of price points include the following:
- A large Virginia firm that specializes in intellectual property, corporations and commercial transactions charges $430 for a 15 page agreement and $500 for a 30 page agreement.
- A large New York firm specializing in entertainment and media law charges $450 to $500 for a 15 page agreement and $700 to $750 for a 30 page agreement.
- A large Dallas firm specializing in corporate and real estate transactions charges $400 for a 15 page agreement and $625 for a 30 page agreement.
- A medium-sized Chicago corporate real estate firm charges $250 to $300 for a 15 page agreement and $225 to $375 for a 30 page agreement.
- A medium-sized New York real estate company charges $500 to $600 for a 15 page agreement and $600 to $700 for a 30 page agreement.
- A small Vancouver entertainment company charges $190 to $250 for a 10 page agreement and $380 to $500 for a 20 page agreement.
It is clear that there are a variety of price points depending on where you live and the type of lawyer you use.
How Attorneys Charge for Contract Review
Clients of all types and stripes employ a range of billing methods in the law. The most common approach is a simple hourly rate. The hourly rate can be specific to the lawyer’s experience (e.g., partner, associate, special counsel), to the lawyer’s area of expertise or to the complexity of the work the lawyer is doing. So for example, a partner who handles criminal matters probably will charge a different hourly rate than someone who does real estate work.
There is also the concept of a flat or fixed fee. This is most frequently found on matters where the scope of work is well known. For example, a lawyer handling the probate of an estate doesn’t have to worry too much about whether the estate comprises $10,000 or $10 million when calculating his fee.
Finally there is the retainer agreement. Sometimes this takes the form of a flat fee and at other times execution of the retainer is triggered by the performance of specified work.
When selecting how to pay. It is important to assess what you are paying for. If the legal work is relatively predictable as described previously on the probate example, the flat fee is preferred as the cost is known and there are no "add-ons" to worry about .
When it comes to hourly fees, they are also not bad if you are comfortable with the scope of the work being performed. If you hire a lawyer to draft a will, that is a fairly predictable amount of work. If you hire them to sue the Internal Revenue Service (IRS) over a tax assessment, your bill will vary based on how the IRS responds to the suit.
Concerns arise when the billing costs are not understood. A lawyer may estimate that a matter will take 10 hours, but then after 30 hours sends a bill for $2,000, even though the matter is not finished. Although a lawyer is entitled to charge for the work they have performed, sending a $2,000 bill in the middle of a case can impact the relationship with the client. At the very least, the client should receive some communication from the lawyer explaining the bill and where they are in the matter.
If you are comfortable having a lawyer retained on a flat fee or on an hourly basis, and the work is proceeding as planned and billed appropriately to you, then the attorney contract review cost will not be as much of a factor. But, if you are having money trouble and your case becomes more complex or lengthy than expected, continued work and payment of the lawyer’s bills could become a chore.
How To Save on Legal Review Costs
As with most things in life, preparation can help reduce costs for contract legal fees and expenses. The more that you can do up front, the fewer hours your attorney will have to spend. Here are some tips that may help you save money:
Know What You Want: Do you currently have a contract? Are you happy with it? What changes would you make? Although you may not be able to articulate everything that you want from an agreement, it’s important to be prepared. Make a rough list of the provisions that are important to you. Share this list with your lawyer at the very start of the process. If your lawyer isn’t accustomed to helping you prepare up front, perhaps they aren’t the best fit for you.
When in Doubt, Say So: When you are asked questions about the contract – or a response to a contract – that you don’t understand, admit it. Ask for clarification and explanations. Not understanding something does not mean that you are incapable of doing a deal, so don’t be embarrassed if you don’t know the answer.
Don’t Come to Your Lawyer "Cold:" It’s hard for any attorney to begin working on a matter before initial information gathering. Be as prepared as possible. Think ahead about what you want, and consider forwarding supporting documentation or data to your contract lawyer prior to their getting down to work.
Review Rough Drafts Quickly: Don’t wait until your lawyer sends the final revision before looking over the document. The sooner you provide feedback, the quicker the process will go.
Make Notes in the Margins: Marking up and redrafting contracts can become burdensome if you don’t give your input. Many clients work well with revisions typed in the margins of a contract, with edits as to the wording of the provisions they would like revised.
Agree to a Total Cost: Some lawyers may agree to a flat fee for reviewing contracts based on an estimated number of hours; others don’t. Get buy-in as soon as possible by agreeing to a fixed fee and limiting the hourly rate. This will ensure that the scope and projected costs of the work are clear.
Negotiate Payment in Installments: Like almost everything else in this world, attorney fees are negotiable. Consider spreading the payments out over time or based on a milestone or event. For example, you might agree to pay a flat fee up front for email communication reviewing and commenting on the contract. If the review results in a revision and meeting, consider paying separately for the time billed up to that meeting.
Whatever you decide, being informed and ready to work is key to reducing any attorney’s costs.
Why It Is Worth It to Get Professional Review
Though the cost for a professional review will often be considerably more than that for a software or other automated solution, investing in quality legal review is often the best way to avoid potentially costly contractual disputes or other financial losses. Consider just a few ways poor contract review can cost you: Some legal review programs retain a cadre of attorneys that specialize in one area of law or business contract to do their reviews. In fact, they may have attorneys who are experts in the legal areas a user may want reviewed or modified. Others will assign a review to an attorney who specializes in a particular area, or perhaps it will be done by an attorney in your legal network with knowledge and experience in the area to be reviewed. Lawyers are experts in understanding the nuances of particular legal issues, to spot potential problems and to evaluate them with the required depth and substance. They are also able to interpret resulting risks for each component considered . Some of those risks could be: need for further legal review; requirement for additional negotiations; loss due to allowing adversarial use of contractual positions not adequately addressed; or even, direct damages from contractual breaches, among others. The issue of software solution versus lawyer solutions goes beyond price. Automated solutions may take on an impressive range of contract contracts, clauses and practices. They may even review for standard clauses or language that is simply missing and may require your attorney’s expertise to identify their necessity. A lawyer solution often has the further capacity to tailor language to better meet your needs, state your business requirements, and include provisions to protect your organization. For example, if a program is typically offered only on a limited basis, or where the offering is always a fixed number of units or an inflexible amount for the audit. Your lawyer can explore whether any of those characteristics can be modified or waived. Most providers have standard offering(s) to address many issues, however, it is prudent not to take them for granted. Your legal counsel may be able to negotiate better terms for you in spite of a regrettably standard offer.