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What is legal malpractice in business transactions?

by | Mar 18, 2024 | Legal Malpractice |

Whether purchasing another business or crafting or reviewing a contract for an important business deal, many companies regularly rely on their legal teams to give them sound guidance on the transactions that build their businesses. When a deal falls through or a contract does not offer the business the protection it needs, it can be easy for company leadership to wonder if malpractice on the part of its lawyers contributed to the problem.

When might malpractice negatively impact a business transaction?

Because legal transactions are a part of many business’ daily activities, it can have significant impact on a company’s bottom line if their attorney does not uphold the reasonable duty of professional care when facilitating transactions on behalf of the business. The financial scope and importance of many transactions underscore why legal malpractice can be very expensive to the client in this context

Attorney malpractice in commercial transactions may include:

  • Failing to properly investigate during due diligence checks, internal investigations and other essential examinations
  • Neglecting to present a clear title to a parcel or building after deficient investigation or inadequate attempts to clear the title in a real estate deal
  • Mismanaging funds like filing fees or money escrowed in relation to a transaction
  • Missing deadlines related to a transaction
  • Writing contracts that are internally inconsistent or vague or that contain errors or omit key language or provisions, leading to potential misinterpretation, legal loopholes or even the end of a prospective deal
  • Engaging in a conflict of interest, including representing both the seller in a commercial real estate deal and the buyer, or having a personal interest in the transaction
  • Failing to communicate appropriately with the business by keeping it apprised of hiccups in the transactional steps
  • Neglecting to carefully review contracts or other legal documents required to facilitate a transaction
  • Taking on legal representation in a transaction when the lawyer does not have the requisite knowledge, experience or training to properly conduct it, resulting in incompetence that could harm the business client, especially in complex investments, secured transactions or other transactions involving intricate processes
  • Failing to consider all aspects of a transaction that require attention such as completing a real estate transaction before ensuring that no zoning issues would prevent the activity the purchaser wants to perform on the premises

As all business owners know, though, not every business transaction will be a success – and the reason for failure is not necessarily the lawyer’s fault. In order for these issues to be considered legal malpractice, you will need to illustrate that you had an attorney-client relationship that triggered the duty of reasonable care, that the lawyer failed to uphold that duty due to negligence or breaches of conduct and that the breach damaged your business as a result.

Discussing your potential legal malpractice case with an experienced attorney could be key to protecting your bottom line. Your lawyer can examine the particulars of your case, help you determine whether malpractice impacted your business transaction and explore the legal options available to your company.