The Gazette 1982

g a z e t t e

april 1982

Practice Notes

Opinion Letters

1. The Law Society's Company Law Committee is

aware that it has become increasingly common,

particularly in international Financing transactions, for

Irish solicitors to be asked to provide formal written

opinions on various matters, including:—

— the legal standing of the client company involved and

its power to enter into the transaction;

— the validity and enforceability of the commitments

entered into by the client;

— the adequacy of any governmental or other approvals

required;

— the stamp duty or other taxation implications of the

transaction;

— the validity of a provision choosing a foreign law as the

proper law of the contract;

— the ability of the Irish party to submit to the jurisdiction

of foreign courts.

2. Views amongst practitioners as to the desirability of

this practice differ considerably. The objections of those

who consider it an undesirable development may be

summarised as follows:—

(a) In the event of a dispute between the parties to the

documents to which the opinion relates, the solicitor

providing the opinion may be inhibited from

contesting, on behalf of his client, the validity or

enforceability of any provision contained in those

documents. Even if the solicitor felt free to represent

his client in such a dispute, a successful outcome

might well result in the solicitor becoming liable to the

other party on foot of his opinion.

(b) In giving such an opinion, the solicitor concerned will

be obliged to make full disclosure of any doubts he

may have concerning the validity or enforceability of

the documents concerned or concerning any other

matter on which he is asked to opine. This may not be

in his clients' best interest, since the client will — at

this stage of the transaction — be anxious that his

solicitor's opinion should be unqualified.

both orally and in writing, on numerous complex

issues during the course of the transaction. It may be

difficult for him to draft a single opinion letter (or,

more likely, modify one presented to him for approval)

which adequately incorporates all the advice he has

already given.

(d) There is frequently great pressure on the solicitor

concerned to provide the opinion with the least

possible delay and expense; this may make it difficult

for him to examine the documentation and to research

the relevant law in the depth which he would wish.

(e) The scale of transactions where such opinions are

required is often very substantial, with the result that

the degree of exposure for the solicitor giving the

opinion is frequently beyond the levels of insurance

cover normally carried or which could be obtained at a

reasonable cost.

(f) The giving of the opinion may render the solicitor

liable for negligence at the suit of parties other than his

own client, to whom he would otherwise have no

liability.

3. Those who favour — or at least do not oppose —this

practice, advance the following arguments in favour of

their views:—

(a) The appearance of a conflict of interest is illusory. It is

the normal duty of a solicitor to see that formalities are

correctly complied with and that documents are

effective to achieve the parties' intentions.

(b) Normally it will be easier for a solicitor familiar with

his own client's affairs to give the desired opinion than

to satisfy the detailed and often onerous requirements

of the other party's solicitors. Thus, the issue of the

opinion will save both time and money for all

concerned.

concentrates the mind wonderfully, and it is salutary

to have to review an entire transaction carefully and

comprehensively just before completion.

(d) If an opinion is clear as to what it covers and the

solicitor issuing it has done his work properly, he

should not be exposed to any undue risk of liability.

4. While the Company Law Committee does not

propose, at this stage, to choose between the foregoing

points of view, it suggests that any solicitor who agrees to

give an opinion of the type described above should

consider the following points:—

(a) He should explain to his client that giving the opinion

may restrict his ability to defend the client in the event

of a dispute occurring between the parties.

(b) He should state clearly the persons to whom the

opinion is addressed, the assumptions on which it is

made (e.g. the accuracy of copy documents, the

continuing validity of consents, the tax residence of

the parties) and the reservations to which it is subject

(e.g. that any foreign judgment may, in certain

circumstances, be reviewed by the Irish Courts).

of Irish Law and to facts within his direct knowledge,

as to the correctness of which he has satisfied himself.

(d) He should not include in his opinion phraseology

which may be used in other jurisdictions but the

meaning of which is unclear in Irish law.

(e) If, as a consequence of issuing the opinion, the number

of possible plaintiffs against the solicitor concerned is

multiplied, the increased risk can be reflected on the

fee charged. •