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Can lawyers commit malpractice when negotiating business contracts?

On Behalf of | Oct 31, 2024 | Business Law

Many businesses rely on lawyers to negotiate contracts that further their interests. Unfortunately, not all attorneys take the kind of care that they should when engaging in this consequential practice.

Legal malpractice occurs when an attorney fails to perform their duties to the required standard of care of professionals within the legal industry, resulting in harm to a client. In the context of business contract negotiations, malpractice may occur if a lawyer’s errors, negligence or breach of fiduciary duty lead to unfavorable terms, financial losses or legal exposure for a business client. 

Malpractice in business contract negotiation scenarios

When attorneys do not meet the professional standards expected of them, affected businesses may be able to pursue a legal malpractice claim to recover damages. Those who are hesitant to pursue such action, for whatever reason,  should know that most lawyers carry liability insurance that helps to blunt the impact of malpractice compensation awards. 

There are several reasons that companies may need to hold lawyers accountable for their failures to exercise proper care in their duties to their clients during contract negotiations. Common concerns include: 

  • Failure to conduct due diligence: A lawyer has a duty to thoroughly research and analyze all relevant details before finalizing a contract. If an attorney fails to conduct adequate due diligence, such as understanding the parties’ financial health, existing obligations or legal history, they may miss critical issues that could harm the client. 
  • Poor drafting or omission of essential terms: Drafting a contract with ambiguous language or omitting key provisions can lead to future disputes and financial liabilities. If an attorney fails to include clear terms or neglects crucial clauses (such as confidentiality, termination or indemnification), they could be considered negligent, due to the risks to which they are potentially exposing their client.
  • Conflict of interest: Lawyers need to take care in order to avoid compromising their loyalty to a client. If an attorney represents another party with competing interests or has a personal stake in the contract, it may affect their ability to provide objective counsel and cause their client harm as a result.
  • Failure to advise on risks: An attorney should proactively advise clients of potential risks and implications of contract terms. If a lawyer overlooks or minimizes risks in negotiations, and the client suffers financial damage as a result, this lack of guidance may be considered malpractice. 
  • Missing deadlines: If a lawyer misses critical deadlines, such as filing dates or response periods, it could jeopardize the business’s interests. 

When a lawyer mishandles contract negotiations on behalf of a business, the consequences can be costly. As a result, it’s important for business owners who have been affected by such misconduct to understand that they may have opportunities for recourse available to them.