Sept. 17, 2014 – This month’s Ethical Dilemmas question focuses on a contract omission that is favorable to your client. What do you do?
Question
Have an Ethical Dilemma?
Ethical dilemmas affect every lawyer’s practice. This series of questions and answers appears each month in InsideTrack. The answers, offered by the State Bar’s ethics counsel Timothy Pierce and assistant ethics counsel Aviva Kaiser, are intended to provide guidance only and are not legal authority. Each situation will depend on the facts and circumstances involved.
I represent the seller in the sale of a business. The buyer’s lawyer and I negotiated the terms of the sale to the buyer. The buyer’s lawyer drafted the contract but omitted a provision that was insisted on by the buyer and reluctantly agreed to by my client. The omission is favorable to my client. Must I inform my client about the mistake?
Answer
No, the seller’s lawyer does not have an ethical obligation under SCR 20:1.4 to advise the seller of the error. In this circumstance, there is no “informed decision,” in the language of SCR20:1.4(b) that the seller needs to make. The decision on the contract has already been made by the seller. See ABA Informal Opinion 86-1518.
Moreover, the seller cannot take unfair advantage of the error.The seller’s lawyer is prohibited by SCR 20:1.2(d) from counseling the seller to engage in, or assisting the client in, conduct the lawyer knows is fraudulent. Similarly, Rule 4.1(b) requires the lawyer to disclose a material fact to a third person when disclosure is necessary to avoid assisting a fraudulent act by a client. In addition, Rule 8.4(c) prohibits the lawyer from engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation.
