The Economic Realities of Online Legal Services

According to a recent study, “an estimated four-fifths of the legal needs of the poor, and the needs of two-to three-fifths of middle-income individuals, remain unmet.“

Recent advances in technology and increased access to the Internet have made it possible for companies other than law firms to deliver document preparation services to these market segments.

Online legal document preparation services provide alternative legal solutions to the vast numbers of people who have unmet legal needs either because they are unable or unwilling to pay for professional legal advice.

Although such services are not without potential problems, proper quality controls can ensure that the benefit from these services outweighs any potential harm.

The diversity of legal documents available online is staggering. As long as you have a computer and a connection to the internet you can purchase a will, divorce, prenuptial agreements, power of attorney, or joint tenancy agreements, just to name a few of the thousands of documents available.

Online document providers not only offer documents to individuals, but businesses can find human resource forms, partnership agreements, commercial leases, non-disclosure greements, and joint venture agreements among many other business documents on offer.

Online document preparation services offer numerous economic benefits. In order to discuss the economic impact of such products on society it is useful to divide the marketplace for legal documents into two groups.

Group one consists of people with the resources to pay for professional legal advice and document preparation.

Group Two includes people who cannot afford legal counsel to complete their document, and must therefore seek alternative solutions.

Although Group One can afford an in-office solicitor consultation, it should be noted that many people in this group often seek out cheaper, more convenient alternatives.

It is also viable to combine the people from Group One who would seek out alternative solutions with those from Group Two who have no other option. This market includes people who need a legal solution, but find consulting a solicitor ‘too costly, excessively time consuming, too cumbersome and convoluted, or just plain forbidding’. Because of these constraints this significant group of people usually leaves their legal needs unmet.

For example, an online service can prepare a document that a court will accept providing Group Two with a solution to their legal problem that they otherwise would not have had. If Group One purchases the same document online it benefits from the cheaper alternative because it has spent less money for the same result. If Group One pays a solicitor to prepare the document, it spends more money for the same result.

Opinions as to whether a software program can generate an effective complex legal document vary widely. Let’s use a Will as an example. If you know your own mind and have good will-drafting software-which can instantly produce all the magic phrases -drafting a sound will requires a very modest investment of time. However, it can be argued that while there is a great deal of standardized technical language in any estate plan, the give and take with a trained solicitor in developing the plan should not be under estimated when dealing with complex issues.

For the sake of discussion, assume that a will prepared by a solicitor costs more but has a higher probability of meeting the testator’s goals than one purchased online. In these circumstances, Group One is better served buying the document from a qualified solicitor Because they will gain greater benefit in the future, this will outweigh the added cost of having the will prepared by the solicitor.

However, if the added cost of a solicitor-prepared document outweighs the benefit, then the individual may be better off purchasing a document online. Group Two benefits from purchasing their document online regardless, because they have a document that accomplishes at least some of their goals that they would not have been able to afford otherwise.

To illustrate, suppose that Group One has the choice of purchasing a will from a solicitor for $500, or purchasing one online for $20. Further suppose that the will prepared by the solicitor has a ninety-percent chance of accomplishing a benefit to the estate of $2,000 over having no will, while a will purchased online has a seventy-percent chance of accomplishing the same benefit. Under these circumstances, the risk cost of purchasing a will online versus paying an attorney to prepare it is $400 and is not high enough to justify the added $480 in cost. Group One should purchase the will online.

However, suppose that the will prepared by the attorney has a ninety-percent chance of accomplishing a benefit to the estate of $5,000 over having no will, while the will purchased online has a ten-percent chance of accomplishing the same benefit. In this case, the risk cost of purchasing a will online versus paying an attorney to prepare it is $4,000 and certainly justifies the added $480 in cost. Group One should purchase the will from a solicitor. In either case, Group Two is better off purchasing a will online than having no will at all because it has at least some chance of realising the benefit to the estate.

Online document preparation clearly benefits Group Two in almost all circumstances. It gets the benefit of legal protection that it would otherwise be unable to afford. As long as the documents purchased online are of acceptable quality, they are better than no documents at all.

Online legal document preparation services provide an important alternative solution to millions of people who currently have unmet legal needs. As the quality of documents produced online increases, society benefits more from these services.

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