Independent Legal Advice
Certificates of independent legal advice come up from time to time when you are signing agreements or borrowing money. They seem simple enough – in fact they seem so straightforward that often people forget what the purpose of a certificate of independent legal advice (an “ILA”) is and treat its execution as a mere formality. The problem with that is that a properly given ILA can protect your interests in a particular agreement, while an improperly given ILA can undermine them.
Say someone (let’s call him Phil) is loaning money to someone else (let’s call him Harvey) pursuant to a loan agreement that Phil wants Harvey to sign. Phil asks Harvey to obtain a certificate of independent legal advice (an “ILA”). (This happens a lot with bank loans or in the course of drafting a marriage or separation agreement.) Phil wants to make sure that Harvey understands the terms of their agreement so it will be less likely that Harvey will come back later claiming non est factum. (That’s lawyer speak for “I didn’t know what I was getting myself into.”) The ILA is signed and attached to the agreement as proof that Harvey received the advice and understood the terms to which he and Phil were agreeing.
The way the ILA is supposed to work is that the individual who is to have the ILA signed (Harvey, in our example) takes the agreement to a lawyer who is not acting for Phil (that’s the “independent” part). The lawyer goes through the agreement and explains it to Harvey and makes sure he understands the terms and the possible repercussions of signing. If there is anything that seems particularly odd or onerous, the lawyer should bring that to the Harvey’s attention. Once that is done, the lawyer and Harvey sign a document stating that this discussion has occurred and that Harvey has indeed received independent legal advice on the agreement in question. This document, the ILA, is returned to Phil and the two parties can then sign the agreement and share a celebratory high five or cocktail.
That’s how it is supposed to happen.
Too often, however, the ILA becomes a perfunctory action in the course of signing an agreement and no actual independent legal advice is related. Some lawyers will simply sign the ILA without actually explaining the agreement or law to the individual in question. Some ILAs are given to an individual by the other party and are told to take it to an in house lawyer to get it signed. In these situations, although the ILA may be signed, the underlying independent advice is never provided, thus rendering the ILA meaningless.
For the individual who is relying on the ILA to bolster the strength and enforceability of their agreement, this can be disastrous. In these situations, despite the signed ILA, if the agreement is later breached, the breaching party can claim that the agreement is not enforceable because of, that’s right, non est factum. An invalid ILA can later lead to an unenforceable contract.
The moral of the story is: if you are going to require that the other party to your agreement provide an ILA, you must ensure that they have the time and opportunity to have an independent lawyer review the document and provide them with some actual legal advice. No cutting corners. An improper ILA is worth the paper it is printed on; a proper one should withstand the ravages of time and trial.