I entered into discussions with an owner to purchase his business. During the process I agreed verbally and via email to pay for the owners lawyer to draft the purchase and sale agreements.

The owner and I created a list of terms for the contract, not included on those terms was that I was to pay for the lawyer fees involved in the drafting of the contract although I fully intended to at closing. The owner was going to finance my purchase of the business.

Upon receipt of the drafted contract the owner had added two items not on the terms of agreement:

  1. mortgage on my home.
  2. The ability to approve salaries and wages for my employees.

I called off the deal in part because of the items above and in part because I felt he had failed to operate the business over the previous 4 months in a manner that would allow me to succeed. He is now taking me to small claims court to pay for the lawyer fees. Does he have a case?

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    This really depends on specifically what you agreed to... Did you agree to pay for the lawyer to draft the agreement, or did you say "I will pay for the lawyer who drafted the agreement at the time of closing"? One says you'll do it regardless of the outcome, the other suggests that the closing must take place for you to pay for the lawyer... – Ron Beyer Oct 19 '18 at 1:49
  • You are accurate in that I agreed to pay for the lawyer fees as a part of the closing costs of the loan when the contract was signed and I have that in an email to the seller. Thank you for the response. – KGuay Oct 19 '18 at 15:04
  • Was it understood that you would have your own lawyer review the contracts or was it expected that you would incur no further fees for the drafting of the contract because they would be fair as drafted? This is important to understanding whether his change of the terms prevented you from getting the benefit you expected to get from paying for the contract to be drafted. – David Schwartz Dec 19 '18 at 10:26

He definitely has a case and will probably win

Here's why:

  • I agreed verbally and via email to pay for the owners lawyer to draft the purchase and sale agreements
  • not included on those terms was that I was to pay for the lawyer fees involved in the drafting of the contract

Therefore your agreement to pay for it is not a term of the contract for the sale of the business.

What it is is a separate agreement? probably a contract in its own right as it appears to have all the necessary elements (see What is a contract and what is required for them to be valid?).

He has fulfilled his side of the contract by providing the draft agreement, you need to pay for it.

If the draft agreement is insufficient (i.e that it contained additional terms) that may mean that you don't owe the money yet but since all that has to be done to make it sufficient is to strike out those terms that does not amount to a "complete and utter failure of consideration" - you might be entitled to a reduction in the fee but it would be insignificant.

  • Thank you for the response Dale. Would you concur with the other comment that if I agreed to the cost of the lawyer as a closing cost then i would not be on the hook for these costs? I'm not looking for damages on my end my only incurred cost was setting up and LLC and website. – KGuay Oct 19 '18 at 15:06
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    This is wholly inaccurate. To take one small bit of it: the part about a reasonable expectation that lawyer would put additional things in the contract. No. Maybe signature lines and some boilerplate language, but it is by no means a reasonable expectation that a lawyer is going to materially change the substance of a contract and not notify the other party. – A.fm. Oct 19 '18 at 19:05
  • Another thing: what in this scenario leads one to believe @KGuay would have to or only be allowed to claim damages? He’s not claiming anything, he’s apparently going to have to defend himself against a claim. – A.fm. Oct 19 '18 at 19:07
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    @A.fm one way of deafening himself is to counterclaim that the contract was not fulfilled or was not fulfilled completely – Dale M Oct 20 '18 at 1:43
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    @KGuay I feel that you should ask your lawyer those questions – Dale M Oct 22 '18 at 5:59

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