The 3 Pros and 3 Cons of Transactional Law

Summary: Are you not sure you want the life or work style of a litigator? Maybe you should consider the practice area of transitional law.
 

 

• There comes a time in the law school career of every prospective attorney in which he or she has to choose what their practice area will be.
• While the terms litigation and transactional might be bounced around within any law school, some legal students may be somewhat confused while trying to decipher litigation from transactional.
• With that known, keep reading this article to find out about transactional law, how it compares to litigation, and the three pros and cons of transactional law.

 
Transactional and litigation law: What are the differences and similarities?

Transactional and litigation law are as dissimilar as they are alike. What makes the two alike is they are both an actionable way law is practiced.

Transactional and litigation law differs in that litigation is usually practiced in the courtroom where an attorney directly challenges another attorney who represents an opposing side.

Lawyers whose practice area focuses on transactional law by nature of their specialty hardly see a courtroom if ever.

Once that is acknowledged, these practice areas begin to resemble each other again in that they both require copious amounts of research and a strong understanding of the desires set down by two opposing parties.

But once that is established, transactional and litigation once again grow apart as litigation is needed if a lawsuit seems eminent, while transactional law is required if both parties are in agreement that a lawsuit is not in either’s best interests.

What is transactional law?

According to Law Teacher.net, transactional law refers to the various substantive legal rules that influence or constrain planning, negotiating, and document drafting in connection with business transactions, as well as the law of the deal (i.e., the negotiated contracts) produced by the parties to those transactions.

Transactional law’s primary focus is the formation, negotiation, documentation, or consummation of business deals. Transactional lawyers therefore must understand the business, financial, and economic aspects of deals so as to draft workable contracts and disclosure documents, conduct due diligence, or counsel clients on issues that require business savvy as well as knowledge of the law.
 

1. The first pro of transactional law: Less involved research = Less law to be concerned with.

 
The transactional lawyer must focus on business issues that affect the client, bring forth relevant developments in business and other interests.

But even with that, transactional law tends to not involve “the law” as often as litigation. This means less trips to the law library as well as less research on issues that are transaction related.
 

2. The second pro of transactional law: A larger variety of legal situations.

 
Most medium and large firms consist of at least two major departments, transactional and litigation.

While the litigation department can be stuck on one specific case for months if not years, such an elongated amount of time is not a factor with transactional law simply because no lawsuits and court proceedings are involved.

Meanwhile, transactional law has more going for it when it comes to variety.

The practice groups in a transactional department may include merger and acquisition work, private equity, and real estate transactions while the litigation department may include legal conflicts involving employment, securities, product liability, intellectual property and insurance.

While litigation attorneys (also known as litigators) deal with the judicial process, civil disputes or criminal cases that are headed to court, transactional lawyers provide advice on how to structure a business and evaluate ventures and coordinate with other specialists like tax lawyers, employee benefits lawyers and real estate attorneys to serve the sophisticated needs of their corporate clients.

Transactional lawyers provide day-to-day advice to their clients, and most of their work restricts itself to law firms. Very little travel or obligations outside the law firm are required of the transactional attorney.

When compared to their counterparts, transactional attorney’s work behind the scenes, writing contracts, completing real estate closings and other legal work that would not involve going to court.

Transactional attorneys aim to help clients avoid litigation through the preparation of contracts and through advising on how to follow the law. This, of course, can lead to a variety of cases that once again, litigators might not have exposure to.
 

3. The third pro of transactional law: You will always have one type of client.

 
Having one type of client tends to simplify day-to-day activities for a transactional attorney in a way that a litigation attorney may never realize.

Transactional attorneys often work for companies or businesses, as most private individual clients don’t require the services of transactional attorneys,

At the same time, litigation attorneys represent both individuals and corporate clients as private individuals may be involved in lawsuits as well.

As having only one type of client can at times be tedious, the advantage for the transactional attorney is they have less discovery to accomplish than would be the case with a litigation attorney who can have a mixture of individuals and businesses – all of which will require research and background work.
 

1. The first con of transactional law: Less exposure.

 
One positive aspect of litigation law is a lawyer who argues a particular notable or popular case can – for lack of better words – become famous.

We’ve seen this with cases such as the O.J. Simpson murder case and countless other court battles which have ample media coverage. In short, with the O.J. case, everyone made out like a bandit with book and development deals as well as other projects. Even the judge found himself in a position where he was able to take early retirement.

No such luck will occur for the transactional attorney.

Transactional attorneys rarely if ever get noticed by external interests. Transactional attorneys are usually tucked away inside a law firm or business with hardly an outside soul knowing those attorneys even exist.

This can lead to the transactional attorney feeling he or she are not appreciated, which can invariably result in worker disenchantment and in the end burnout or worse.

Meanwhile the litigator who’s been sucked up in the vortex of a strong civil or criminal case, might now appear regularly on the nightly news.
 

2. The second con of transactional law: Representing big business doesn’t net you bigger paychecks or more job security.

 
When it comes to the monetary aspect of either career option, transactional lawyers or litigators may work for the same kind of clients and earn the same kind of money.

However, litigation is recession-proof. While corporate work slows down in an economic downturn, litigation doesn’t. People sue each other in good times and bad.

There also is the case of the client themselves. Having only one client can be detrimental to a transactional attorney’s career should that client go belly up or decide to fire their counsel.

Doing so could mean all the transactional attorneys who represent this one client will find themselves without a paycheck.
 

3. The third con of transactional law: At times there could be more complexity.

 
While there is little to no recognition for the transactional lawyer, another con for those in this practice area is that the minutiae of transactional law can run into complexities litigators never have to deal with.

This can entail complex and extensive rules, chiefly those concerning fiduciary obligations and misrepresentation if the transactional lawyer fails to perform loyally and competently. At that point, the transactional attorney may find himself responding to the client’s malpractice claims.

Frequently Asked Questions
 

What Do Transactional Lawyers Do?

A transactional lawyer oversees contracts and agreements relating to financial transactions. Verify all documentation, negotiate on behalf of the company, and offer legal counsel regarding intellectual property, real estate transactions, licensing and trademarks, and mergers and acquisitions. A transactional lawyer can also assist with estate planning. As a result, they can write wills, make the power of attorney documents, and create employee agreements.

Transactional lawyers also offer their clients legal advice to help them develop contracts and agreements that meet their needs and provide adequate protection.
 

When Do You Need A Transactional Lawyer?

If you are considering estate planning, you should hire a transactional lawyer. Your will should be legally certified. In the event that your business is about to complete a large transaction, you may also want to consider hiring a transactional lawyer. Prior to moving forward with a purchase or sale, a transactional attorney can verify contracts and agreements.

It is still a good idea to hire a transactional lawyer even if there are no large transactions planned. You can get assistance with any legal documentation you have and get ready for big transactions in the future. Hire a transactional attorney if you want to avoid litigation in the future.
 

How A Transactional Lawyer Can Help You?

Lawyers who specialize in general transactional law can be of assistance in many different situations. Regulations research is what they specialize in, and it is referred to as due diligence. A transactional lawyer will conduct all the legal research necessary to verify all contracts, agreements, and transactions to ensure everything is done in the client's best interest. The following are some examples of what a transactional lawyer does for a business:
 

• Verifies contracts
• Draws up contracts and agreements
• Drafts employee contracts
• Offers legal counsel on general compliance matters
• Completes due diligence (legal research) on behalf of the client
• Designs policies
• Drafts up protection of intellectual property
• Offers legal advice on matters of employment, fiscal responsibilities, and transactions

 

What To Look For In A Transactional Lawyer?

Do you know what to look for in an attorney when you interview one? The following qualities will help you find the right lawyer for your business:
 

• They understand your business: You should discuss your business with your potential attorney and ask relevant questions to determine if they understand how things work in your business, not just in your industry. To handle negotiations properly, they need to be well-informed. Make sure they are the right fit for your business by providing an example and seeing how they respond.
• They ask for your opinion: A good transactional attorney knows more than the law. They must understand your needs and do their best to make sure you are happy. Your interests must matter to them, not theirs. A good lawyer will ask for your opinion and give you a variety of options to choose from.
• They are flexible: Even though agreements must be ironclad, you also need a lawyer who is flexible. Your lawyer should be committed to serving you and to rolling with the punches instead of just securing the deal they initially proposed.

 

The Benefits of Hiring a Transactional Lawyer

Hiring a transactional lawyer can have many benefits for you and your growing business, including:
 

• Your will or contract will have more weight in court if it is drafted and signed by a transactional lawyer.
• You will discover legal issues with your business transactions before completing the exchange.
• A good transactional attorney can help you with income tax filings.
• They can save you money by preventing you from getting pulled into litigation.
• They can offer estate planning advice.

 

What Is Considered Transactional Law?

Transactional law refers to all aspects of business dealings between companies and/or individuals being addressed. Doing business involves numerous transactions and obligations. An effective, efficient process, combined with legal compliance, is the basis for a solid business foundation. Attorneys who specialize in transactional law assist with a wide variety of business, money, and commerce transactions. Here is an overview of transactional law, including basic categories and how it impacts businesses.

The law of transaction refers to the legal transactions and communication that are inherent in conducting business. Our firm handles the following basic and broad areas of transactional law, including:
 

• Corporate Law
• Commercial / Business Law
• Intellectual Property Law
• Entertainment Law

There are a variety of different types of contracts, agreements, and regulations associated with different types of business. Moreover, different business types are susceptible to different kinds of legal issues. The field of transactional law covers all types of business activities. As a result, business owners should seek out attorneys with transactional law experience handling the type of transactional law issues involved in their business.
 

What Types Of Law Are Transactional?

The following transactional law overview provides information on the various categories of law related to business transactions.
 

CORPORATE LAW – A TRANSACTIONAL LAW OVERVIEW

Prestigious corporate practice groups focus on forming and managing entities. There are many types of entities. Choosing the right entity type may require consulting an accountant and a corporate law attorney.  Business entities can only be legally formed as certain types of entities, such as professional businesses requiring a license. Additionally, there are various tax benefits to forming an entity in one jurisdiction rather than another. Additionally, the government offers incentives and tax breaks to businesses owned by veterans, women, and non-profits. It is important, however, that business owners apply for and are approved for such tax breaks.

It can be difficult to set up everything correctly at first. Therefore, potential business owners should consult with a business lawyer who has experience with corporate and transactional law.

Legal services offered by the corporate lawyer and IP business lawyers include the following:
 

• Entity Selection
• Company Formation
• Drafting and Review of Company Agreements
• Business Planning
• Annual Minutes and Reporting

 

COMMERCIAL LAW AND BUSINESS LAW – A TRANSACTIONAL LAW OVERVIEW

The focus of commercial and business legal services is on the wide variety of transactions that affect businesses. A business owner should ensure that they are legally compliant once the company is established and starts operating. Different types of businesses are subject to different laws. A business law attorney assists business owners in a variety of legal transactions. 

Commercial and business transactional attorneys at a firm provide comprehensive transactional legal services including:
 

• Corporate Finance
• Contract and Commercial Agreements
• Employment Agreements
• Business Transactions
• Virtual General Counsel
• Mergers and Acquisitions
• Private Equity, Venture Capital
• Corporate Governance and Counseling
• Franchising and Franchise Agreements
• Master Services Agreements
• Indemnity and Hold Harmless Agreements
• Non-Disclosure Agreements
• Non-Solicitation Agreements
• Non-Compete Agreements
• Confidentiality Agreement

 

INTELLECTUAL PROPERTY (IP) LAW – A TRANSACTIONAL LAW OVERVIEW

Inventions, trademarks, copyrights, and other creative expressions are subject to intellectual property rights (IPR). IP rights are extremely valuable assets in every industry. Maintaining the various forms of intellectual property rights requires understanding how to protect them. Business owners should be aware of IP protection when engaging in general business transactions.

IP attorneys advise a business on the protection and enforcement of IP in a transactional law overview.

In business transactions, owners should protect the following intellectual property rights:
 

• Trademarks
• Trade Dress
• Copyrights
• Patents
• Trade Secret
• Rights of Publicity

Intellectual property attorneys also assist with the protection and enforcement of IP rights through, for example:
 

• Licensing Agreements - Trademark Licensing, Copyright Licensing, Patent Licensing
• Review, Draft, and Negotiation of Contracts Involving IP Rights
• IP Portfolio Management and Maintenance
• Intellectual Property Oppositions and Cancellations
• Creation of Custom IP Rights Monitoring as well as Enforcement Programs
• IP Infringement Litigation

 

ENTERTAINMENT LAW – A TRANSACTIONAL LAW OVERVIEW

The entertainment industry encompasses many different categories and involves many different kinds of legal transactions. Each sector of the entertainment industry has specific requirements, whether it is sports, music, or film. In light of this, one seeking legal advice in the entertainment industry should consult with attorneys experienced in the specific type of entertainment issues involved.

Attorneys review a variety of substantive areas in a transactional law overview of a business involved in entertainment, including, for example:
 

• Intellectual Property Rights
• Contracts
• Labor and Employment Law
• Securities
• Business Law

Intellectual property attorneys also assist clients with entertainment law through the following services, for example:
 

• Assistance with Financing Agreements
• Draft and Negotiate Development Agreements
• Draft and Negotiate Production Contracts
• Create Custom Appearance Releases
• Secure Trademark and Copyright Protection
• IP Licensing
• Royalty Agreements
• Intellectual Property Rights Assignments
• Create IP Monitoring as well as Enforcement Programs

 

Is Transactional Law Dying?

Recent conversations with attorneys have convinced me that transactional work is in danger of becoming extinct. Technology has flattened the work, and people and companies no longer find it valuable. The vast majority of documents and contracts are really just small variations on a norm that do not require that much legal work. Legal counsel or consulting regarding these documents is also not seen as valuable by people or companies. Transactional legal work has become a mere transaction expense.

Over the last two years, the transactional practice has outpaced litigation nearly every quarter. As a result, transactional practices have gradually gained a share and now account for approximately 32% of large law firm billings.

This trend has not changed recently. Litigation demand declined by just under 1% in 2014. Transactional practices grew 3.3% last year - and all four practices (general corporate, mergers and acquisitions, real estate, and tax) were positive. Transactional practices increased by 2.5% in the first quarter of 2015, while litigation declined by 0.3%.

According to Thomson Reuters, "it may be relatively easy for clients to move transactions down-market without significantly altering their risk profile." This follows if you believe that transactional work is no longer "important work," even at the level of Am Law 100 clients. The fact that large amounts of transactional work can be fungible is becoming increasingly apparent to clients, even large ones. It forces work to move downstream to firms that can do work that is "good enough."

According to Daniel Gershburg, a real estate and bankruptcy attorney in New York with a successful small-firm practice, 90% of the work done in many small firm transactions is boilerplate. Other transactional attorneys echo a similar line of thinking. People and businesses are expected to shift any transactional work away from attorneys and towards technology once the technology becomes more robust and people feel comfortable with relying on apps and services.

People and businesses are already doing so in many cases. Many people rely on LegalZoom and RocketLawyer as alternatives. Apps such as Shake further lower the barrier to entry (to nothing) for basic transactional work that was once handled by a small firm. Since legal technology companies are taking on record amounts of venture capital funding, even if their ideas are not the best, this trend is not going to slow down.

In that case, what do lawyers in small firms who rely on transactional work do? Switch to litigation? Criminal defense? As a result, there are already many lawyers in those areas who have experience in those fields, and it will be difficult to compete. It is hard to say if there is a solution.
 

What Is The Difference Between A Transactional Lawyer And A Litigation Lawyer?

Even though both a transactional lawyer and a litigation lawyer can be beneficial to a business, they have different areas of expertise. According to the definition above, a transactional lawyer provides legal advice on business transactions, contracts, and agreements.

A litigation lawyer, by contrast, specializes in settling active litigation in civil court. Hiring a transactional lawyer is the best way to avoid any litigation in the future. Nevertheless, problems can arise. Whenever you are involved in a civil case, you should consult a litigation attorney to ensure that your defense is strong and your case is resolved as quickly as possible.

Conclusion

Of course depending upon the individual, there are many more pros and cons to being a transactional attorney, including those that directly compare and contrast with litigation attorneys.

For instance, it is much easier to transit out of transactional law into business since the acquired skill set is more readily transferable to a non-legal business job such as investment banking, private equity, and real estate development. This provides a greater avenue of exposure and increasing mental security.

Transactional law offers a wide range of practice niches that allow associates to develop a specialized skill set that can enhance their marketability in the future.

A practice niche can be focused exclusively for specific types of transactions such as structured finance and derivatives work, or can be slightly broader to include a range of transactions which can include banking and securities work. It is also possible to create a niche in a particular industry sector, servicing clients in industries such as new media, manufacturing, intellectual property or entertainment.

To that end, if arguing in a courtroom after having done massive amounts of research, all while you are not one who cares if you’re in the limelight or not of what has become litigation law, consider transactional law. It’s just as solid and the opportunities of practicing in this area can be more than satisfying.