Precedents: Lessons for Smaller Firms from the Large Firms

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					      Precedents:
Lessons for Smaller Firms
  from the Large Firms




                                   Hugh Laurence
                            Barrister and Solicitor
                                  LegalTech 2004
                              November 12, 2004
            Precedents: Lessons for Smaller Firms from the Large Firms
                                  Hugh Laurence


       Most of the large firms in Toronto have hired lawyers whose primary, or even

sole, function is to manage the firm’s precedent collections. These lawyers collect the

firm’s work product and edit documents to prepare standard forms. Since the large firms

use a wide range of such standard-form documents, these collections cover many areas of

the law. Within any one practice area, the collection can be very extensive, with many

variant forms.



       A large-scale collection like this is beyond the reach of smaller firms. These

firms cannot support a full time precedent manager, and do not require documents in as

many areas of law. But every lawyer uses precedents to help prepare documents. How

can the smaller firm prepare a useful precedent collection? Here are some tips that larger

firms have found useful, and which might apply to a smaller firm.



1.     Your own work product is the best precedent for work you regularly perform



       Most lawyers concentrate on specific areas of the law. They become familiar

with the documents, processes and legal principles in those areas. The best precedents in

those areas are therefore the documents from recent transactions. Lawyers in the larger

firms know this well. They keep copies of deal books, and they use sophisticated

document management software that allows them to find examples of their own work

product. Many lawyers in larger firms rely solely on their own work product to serve as



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precedents. They insist their juniors refer back to previous deals for precedents, rather

than to some more general document.



         If you are going to use your own work product as precedents, you need to be able

to find it quickly and easily. It is especially important that you be able to find examples

of the major documents from a transaction. If you file only paper copies, you might

consider dividing client files into sub-files. The key documents can be put in a coloured

folder for quick retrieval. Train your assistant to do the filing frequently, and you will

have a quick reference to documents. You can also create special precedent folders and

put copies of documents into those folders at the same time. Many lawyers and clerks in

the larger firms have this kind of paper-based precedent file. The big advantage of paper-

based precedent files is that they are easy to read. The big disadvantage is that they are

not always easy to find.



         But finding documents on a computer system can be even more difficult. You

need to think carefully about how to store documents electronically so you, or those who

work with you, can recover them when you need them most. Here are a few simple

principles that will make it much easier to find documents on a computer system:



   (a)      Don’t use abbreviations in the description or name of the document, or you

            may never find it again.




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      This is especially important if anyone other than you will be using the system.

      No one can outguess abbreviations. There is nothing more frustrating than

      looking for a document that has been named “doc” or “ltr” or “agt” or, even

      worse, “003.” You have no idea what that document is. All modern computer

      operating systems allow you to use longer names for documents. Settle on

      expanded naming conventions and use them. Make sure your assistants also

      use them, even when they are in a hurry to produce a document.



(b)   Remember to store useful documents where you can find them.



      Send an extra e-mail to yourself, or your assistant, when you send drafts to

      clients with useful attachments, so they can be kept on file as precedents. Or

      save useful documents a second time in a useful place as you create them.

      You can use the “save as” feature of your word processor to put a copy in a

      second file.



      The most useful draft to use as a precedent is the often the first draft. That

      draft reflects the best position of the person preparing it. Save your own first

      drafts, and those sent to you, in different files, marked for the appropriate type

      of client. That way you will not confuse a buyer’s form of asset purchase

      agreement with a seller’s form.




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(c)   Don’t rely on your memory – make notes so you know why you are saving

      each document.



      It only takes a moment to highlight special features of a document. Although

      it is difficult to remember to do this, and to force yourself to take the time, it

      pays off when you try to find that document a second time. If you do not have

      document management software, you can make notes at the end of the

      document. Then you can use the search feature of your operating system to

      recover the document by searching the text of the document. If you are

      especially clever about it, you can mark the special search terms so that you

      recover only the documents you have marked. You might, for instance,

      include something like “XXXasset purchaseXXX” for an asset purchase

      precedent. If you then search for that string of characters (including the

      “XXX” at the beginning and end), you will retrieve only those documents so

      marked, not every asset purchase agreement you have ever done.



(d)   Don’t force the user to outguess the system.



      You may not remember which of several headings you used to store a useful

      document. Other people who use the precedent system will also not know

      how you store documents. So make it easy for them – store documents under

      ALL the headings that might apply. If there are synonyms for document




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      categories, either store documents under both alternatives, or let the user know

      that documents for a heading are actually to be found somewhere else.



      You might, for instance, put a copy of a confidentiality agreement in a folder

      called “Confidentiality Agreements” but also in your “Asset Purchase” and

      your “Share Purchase” folders. This makes it easier for everyone to find the

      documents. Don’t try to create the perfectly consistent filing system – be

      messy and store things anywhere you might think of them again.



(e)   Index your collection – don’t leave things in a heap.



      Precedents have a way of mounting up. You review your precedent file, and

      fine a lump of documents, some of which date back some time. You don’t

      remember why you saved any particular document, and you don’t know which

      document is the best precedent. Someone reviewing that file has even less

      idea than you do where to start.



      Go back and index your collection. Within a group of asset purchase

      agreements, for instance, you might want a way of distinguishing standard

      purchaser long forms, short forms, vendor forms and special forms for unique

      kinds of property. There are some tips for indexing later in this paper.




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2.     Standardize documents you use frequently



       While is useful to save drafts of documents as sent to the client, it is especially

handy to have a master document that has no client names or particulars from any one

deal. You should keep that document updated as you get new ideas from deals.



       You may want to include some alternate clauses in your document. You can use

your word processor to do this. Put the alternate clauses at the end, each on a separate

page. Then use the “Insert…bookmark” at the beginning of each alternative. You will

have to give a name to each such bookmark. You can then insert a link to these

bookmarks in the main text, so you can jump to the text when you would like to see it.



3.     You can create an alphabetical index of all precedents using hypertext



       Some lawyers find documents best by consulting an alphabetical list of

documents. In preparing an alphabetical list, remember to include multiple references to

documents that might be called different things. You should, for instance, provide an

entry leading to a general security agreement under both “G” for “General” and “S” for

“Security Agreement, General.” The more entries you have, the less the user has to

outguess the indexer.



       Most of the large firms prepare these alphabetical indices using their document

management software, or in their intranet. If you have a firm intranet, you can use it the




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same way. But if you don’t, you can still prepare a very useful alphabetical index using

the hypertext features of Microsoft Word. You create the alphabetical list in one

document. Then each entry in that list is linked by a hypertext link to the document to

which it refers. You insert the hypertext link by clicking the appropriate button on the

tool bar. You then browse to the document you want to link and select it. To use the

link, you hit “Shift” and click on the name of the document in the alphabetical list. That

will open the precedent in your word processor.



       It is best to keep the alphabetical index in folder with the precedents, or in a head

folder with subfolders holding the precedents. You can even use the hypertext feature to

create a sophisticated index and sub-index structure. You prepare a sub-index for a

particular area. Each entry in that sub-index is linked to the precedent documents. Along

with the link, you can put a full description of the document. Then another document

contains higher level links to the sub-index documents. If you put all the index

documents in one folder, you can have a very quick search for documents by doing a full

text search only in that folder. Once you have found the document that you need, you

can link to it using the hypertext feature.



4.     You can create a taxonomy of subjects as well

       There are various ways of indexing a collection of documents. In addition to the

alphabetical index of document names, you can prepare a subject index for your

documents. The real lesson to be learned from the efforts of indexing large collections is




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– index in as many ways as possible. The more you are willing to index documents, the

easier it is to use a collection of precedents.



        Preparing a subject index, however, is not as straightforward as preparing an

alphabetical index. A good subject index contains enough subject categories to lead you

to the right document. The danger, however, is that in preparing a good finding list, you

will use more categories than you really need. This makes it difficult to find what you

really want. It also forces others to outguess how you have categorized documents.



        There are some general principles that are useful in constructing subject indices:



        (a)     Use your subject index for general categories; use a search for more

                specific material.



                You can use the hypertext system outlined in the previous section to create

                a subject hierarchy. You can search the hierarchy by reviewing the index

                document, or even by searching through the text of that document.



        (b)     Do not nest too many layers in your subject index.



                Keep the taxonomy simple – two or three layers. If you want more in a

                special area, be sure you can work through the system. If others have to

                use it, consider putting some of the sub-areas at a higher level.




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       (c)     Subject sub-headings also belong in several places.



               You should consider putting sub-headings in several places, rather than

               trying to work out one perfect and consistent system of headings. Any

               perfect system involves compromises. Rather than compromise, allow

               some redundancy in the system.



4.     A “just in case” system is expensive and difficult to maintain



       Any collection of documents you “might” use is hard to maintain. You do not

necessarily have good models to work from, and the collection is rarely complete. In

many areas, you do not necessarily know the law well. Even if you know general

principles, you don’t necessarily know the most recent changes. You may lack the time,

or the expertise in the firm, to update the documents.



       Large firms do put considerable resources into keeping “just in case” systems, but

these collections can become an expense for any firm. The biggest problem with them is

keeping them complete and up to date. As well, lawyers not familiar with the area of

law, or the business transactions, put too much reliance on the precedents. While it is

true that legal documents contain the experience and wisdom of the firm, it takes training

to know how to use that experience and wisdom. Documents that are kept “just in case”

can be useful as reminders of some key things to think about, but they cannot substitute




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for good training and experience. You are probably better off keeping a good precedent

system for the areas of law in which your firm practices regularly, and not expending too

much energy on trying to keep a collection of every possible document.



5.     You can find some good model documents on line



       If you know an area of law, you can find some good model documents on-line.

While it is dangerous to use a precedent with which you are not familiar, you can find

some good models with annotations that help you decide when and how to use the

document. These sources for sample agreements are recommended for reference

purposes only.



       http://www.megadox.com/documents.php/4 has a number of Canadian forms,

       some of which are free, and some of which cost a nominal sum.



       http://www.legalranks.com/legal-forms.htm is a link to several legal form

       suppliers of United States forms.



       The Ottawa Business Journal's Standard Canadian Business Agreements

       collection contains over 100 employment, selling, buying, collections and

       corporate agreements that are ready to use as is, or customizable. Downloads are

       free




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Alan Gahtan's Canadian legal precedents: This site is particularly strong in

agreements for e-commerce and website design.



Industry Canada's Technology Commercialization Toolbox contains licensing,

confidentiality, research and collaboration agreements. It also has helpful

comments explaining how to use the documents.



Jurist International is a collaboration between the University of Montreal's

Faculty of Law and universities in Switzerland and France. It offers sample

international trade and business agreements in English, French and Spanish.



www.arvic.com/forms contains employment and other basic agreements.



The Law Society of British Columbia has a number of model agreements on their

web site at www.lawsociety.bc.ca/services/frame_practice.html.



The Law Society of Upper Canada has rich on-line resource. All of the reference

materials for the Bar Admission Course are available on-line. These form an

excellent introduction to many practice areas. They are available without charge.



The Law Society of Upper Canada also publishes a number of annotated

documents in various practice areas. They are on-line at




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       www.lsuc.on.ca/services_en.jsp. The siste contains the following sample

       agreements:



               The Annotated Commercial Mortgage Commitment

               The Annotated Employment Agreement

               The Annotated Loan Agreement

               The Annotated Retail Lease

               The Annotated Share Purchase Agreement - December 11, 2003

               Annotated Documents for a Power of Sale

               The Annotated Shareholder Agreement

               The Annotated Agreement of Purchase and Sale for Residential Property

               Annotated Pleadings for a Personal Injury Action

               The Annotated Trust

               Annotated Documents for an Injunction

               The Annotated Power of Attorney for Property

               The Annotated Will

               Separation Agreement Annotated



A number of government sites also have forms online. There are also various sites that

have documents from the United States. Some of these have very sophisticated

documents. These have been drawn from securities filings, and therefore refer to large

transactions by public companies. These documents may not be most useful for your

practice. But if you need to see the latest greatest thoughts of the large United States




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firms, you can find a wealth of information online. You might try www.findlaw.com as a

start.



6.       If you don’t know an area of law, be very careful about using precedents.



         Precedents are no substitute for proper training and experience. If you don’t

know anything about the area of law, consider referring the work to someone who does.

At least get some advice from someone who does have experience in an area. You may

need to learn quickly, and there are some resources for this. The “annotated documents”

series from the Law Society of Upper Canada, and the Bar Admission Materials on their

web site, are good places to start. All lawyers, however, need to stay up to date with their

practice areas, and need to provide good training for juniors.



7.       Needs for the smaller firm



         Despite all the help you can find on-line and in published sources, and all you can

do for yourself, the smaller firm does face a number of challenges in setting up a

precedent system. First and most important is the need for training and updating in the

law. Precedents are dangerous without the experience to extract knowledge from them.

Smaller firms cannot afford to pay a full time training and development lawyer. Real

training is best when it is also just in time, not just in case. It is hard to find training at

exactly the moment you need it.




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       As well, the effort to implement software seems larger in the smaller firm.

Preparing any document management system involves a significant investment in both

money and time to set up effectively. As well, document management systems work well

for the clerical staff in the office, but many lawyers in the larger firms do not find them

very useful, especially for precedent systems. You may find it more useful to manage

only certain documents, rather than trying to manage everything.



       And all firms need more in the area of real knowledge management, rather than

just document management. There is a real need for software that will help the lawyer

organize all of the information associated with a particular matter. A full matter-centric

system can be developed, but is not yet available off the shelf. And all such systems

require real work to set up to match any individual practice.



       Smaller firms are also challenged by the amount of administrative time it takes

just to use a sophisticated system. The more indexing and organizing you want to do, the

more time it takes to do it. Each lawyer has to balance the amount of time available to

manage any collection of documents.



       Even so, there is a lot the smaller firm can do to organize a reasonable precedent

system that serves the needs of its lawyers. If you follow the tips learned by the larger

firms, you can create a useful system without excessive effort, or have one created for

you by a consultant knowledgeable in this area.




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