Distinction level notes for the LPC at University of Law. Laid out in clear table format and covering all course content in workshop order for the 2018/19 course, these are the most up to date and comprehensive LPC notes currently available, and include step-by-step model answers and specimen paper...
Principle 4: separate duties to act in the best interest of each client
O3.5: cannot act where there is a client conflict (see conduct notes) or a significant risk
of a client conflict
GENERAL RULE Apply to the facts; there is a conflict here because the buyer will want the lowest
price for the property and the seller will want to get the highest price for it
There are two main exceptions
1. O3.3 identifies some relevant circumstances:
a) Clients have different interests (such as the best price)
b) Whether the client is vulnerable or imbalance of bargaining powers
WHETHER CONFLICT
c) A need to negotiate between terms
OF SIGNIFICANT RISK d) Solicitor’s ability to give independent advice will be fettered
OF ONE 2. The following will tend not to achieve O3.5 (therefore, conflict)
a) IB3.3: acting where matters of substance are being negotiated (such as price)
b) IB3.14: acting for the buyer and seller in a transfer of land for
value/grant/assignment of a lease
3. Consider whether buyer and seller are related or associated companies
If so, may not be a conflict (check facts carefully)
O3.6 states that you can act if there is a substantially common interest (see conduct
notes). This could apply where:
SUBSTANTIALLY The property is being gifted, or
COMMON INTEREST Purchase on developer’s standard terms (but watch out for imbalance of bargaining
power IB3.4)
Generally not applicable as each party wants the best price for the transaction; IB3.11
O3.7 is never relevant (parties are not competing)
Always apply it to the facts & consider whether a conflict could arise in the transaction
Decision is ultimately the solicitor’s to make
CONCLUDE Consider age of the seller/buyer, bargaining power, mental capacity, history of purchases,
undue influence
Not many firms will act for both in commercial transactions
1
, CONDUCT ACTING FOR BORROWER & LENDER
A duty is owed to both clients independently (Mortgage Express), but the solicitor may act
GENERAL RULE for both the borrower and lender unless there is a conflict of interest or a significant risk of
one arising
WHETHER CONFLICT O3.5 states that generally there will be conflict where:
OF SIGNIFICANT RISK The terms of the mortgage are negotiable
OF ONE The buyer wants a cheap and flexible mortgage whereas the lender wants
profitability and good security
O3.6: this is applicable because both the buyer and the lender want the buyer to obtain
good title to the property and ensure that there are no problems that could decrease its
value
If the exception is established, then put in safeguards:
SUBSTANTIALLY i) Explain relevant issues to client
COMMON INTEREST ii) Have a reasonable belief they understand the issues
iii) Both lender and borrower give informed, written consent to you acting
iv) Satisfied that the benefits of you acting for both outweigh the risks; and that
v) It is reasonable for you to act in all the circumstances
O3.7 is never relevant (parties are not competing)
COMMERCIAL PROPERTY RESIDENTIAL PROPERTY
Mortgages will usually be negotiated, so It will be fine if it is on the standard
separate representation is required mortgage terms: (IB3.7)
and advisable Provided in normal course of lender’s
CONCLUDE A solicitor may do title investigation for activities
both parties and then cease to act A significant part of those activities is
(IB3.3) lending; and
Material terms are not negotiated by
the parties
Immediately decline to act for both
WHERE THERE IS A OR
CONFLICT
Continue to act for one with the other’s consent
Do not reveal the nature of the conflict without consent (Halifax Mortgages v Stepsky)
2
, CONTRACT RACE
ACTING FOR THE SELLER ACTING FOR THE BUYERS
Winner is one ready to exchange first (signed contract and full deposit)
High risk for buyer’s (abortive costs); consider becoming uninvolved If two or more buyers ask a firm to
act for them in a contract race, then:
If the seller’s solicitor is asked to deal with more than one prospective
buyer at the same time, the solicitor must: There is a conflict of interest
O11.3 Immediately inform all buyers/solicitors of the seller’s triggered under O3.5, so you
intention should not act, unless O3.7
Explain to the seller that they must do this and it must be done exception applies: (competing
immediately for same objective)
i) Buyers are
Seller Refuses sophisticated users of
If the seller refuses to allow you to disclose to the other buyers, then: legal services (IB3.6);
Confidentiality duty is triggered under O4.1 and so you cannot and
disclose to the buyers without the seller’s authority ii) It is a commercial
You must decline to act transaction
Avoiding Contract Race
To avoid a contract race, ensure only one buyer is in possession of a
draft contract at any one time. This would not trigger O11.3:
B1 has the draft contract when you receive a better offer from B2
Ask B1 to return the draft contract and withdraw S’s acceptance
Accept B2’s better offer and submit draft contract to them instead
JOINT BORROWERS (UNDUE INFLUENCE)
GENERAL A solicitor may act for joint borrowers provided a conflict of interest does not arise (O3.5)
Husband borrows against matrimonial home to put money into business
Wife is required to consent to the mortgage
SCENARIO Lender will worry that if they claim against the house, the wife will claim UI to set the
mortgage aside
i) If the transaction is not to one borrower’s advantage, the lender is put on enquiry
(Royal Bank Scotland v Etridge)
THEREFORE ii) Lender must take reasonable steps to satisfy itself that the person is fully aware of the
practical implications of the mortgage
iii) Lender will rely on solicitor’s confirmation that they advised borrowers correctly
(below)
The solicitor must:
a) Advise the person face-to-face (without the other borrower present)
b) Use non-technical language
SOLICITOR c) Give reasoned advice as to the disadvantages of the transaction
REQUIREMENTS d) Get express authority from the person to give to the lender
e) If it is obvious the person is being wronged, you must decline to act
There is no presumption of undue influence for husband/wife
PRESUMPTIONS There is a presumption for solicitor/client and parent/child (rebuttable)
3
, UNDERTAKINGS
“a statement made by you or your firm to someone who reasonably relies on it that you or your firm
DEFINITION will do something or cause something to be done or refrain from doing something”
State that Undertakings apply to Principles 1, 2 and 6
PRINCIPLES
WHAT THEY An enforceable promise that may be done orally (but make an attendance note)
ARE The word “undertake” is not required
O11.2: perform them within an agreed timescale or a reasonable amount of time
Ambiguity will be read against the giver
If costs isn’t specified, ‘proper costs’ is implied
WORDING Even if expressed as “on behalf of client”, it is still personally binding on the solicitor
It can, in theory, exclude personal liability of the giver (but it will not be accepted)
Personally binding upon the solicitor who gave it
It is the responsibility of the firm to make sure it is honoured (especially if it is a junior
WHO BOUND lawyer). If not, Partners will be in breach of conduct
BREACHING If a solicitor breaches, they are personally liable for any loss caused (Udall v Capri Lighting)
AND Courts can enforce them (the SRA cannot)
ENFORCEMENT SRA can take disciplinary action against the solicitor who breached, ultimately being stricken
off the Roll
If the undertaking becomes impossible to perform, solicitor is still bound by it
The recipient may agree to release them
IMPOSSIBILITY IB11.6: if a conditional undertaking can no longer be performed, inform the recipient
immediately
Do not accept an undertaking from an unqualified person because they cannot be enforced
UNQUALIFIED O11.1: should not take unfair advantage of unqualified persons
PERSONS IB11.7: should not take advantage of another’s lack of legal knowledge, so it is inadvisable to
force on them an undertaking
IB11.5: should maintain a proper system of given and received undertakings
Undertaking should ideally be given:
BEST PRACTICE By a Partner
In writing
If you are certain you can carry it out (client has money)
Express and current client instructions and consent
4
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