Conflicts of Interest · 12-18% of the exam
10.1.1Business transactions with clients (Rule 1.8(a))
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- Rule 1.8(a) — Business transactions with clients (Model Rule 1.8(a))
DRAW
- DDisclosed in writing
- RReasonable opportunity to seek counsel
- AAdvised in writing
- WWritten signed consent
Why
Clients who retain a lawyer are vulnerable in any business deal with that same lawyer; the trust built during representation can overwhelm independent judgment. A deal struck inside that relationship has none of the arm's-length distance an ordinary bargain has, so the rule supplies the distance from outside.
Plain English
A lawyer who buys property, borrows money, or accepts equity from a client must satisfy all four DRAW (Disclosed in writing · Reasonable opportunity to seek counsel · Advised in writing to seek counsel · Written signed consent to essential terms and the lawyer's role) conditions. Meeting most of them isn't enough.
Rule
Rule 1.8(a) — Business transactions with clients (Model Rule 1.8(a))
A lawyer shall not enter into a business transaction with a client, or knowingly acquire a financial interest adverse to a client, unless ALL of the following are met:
The transaction and its terms are fair and reasonable to the client and fully disclosed in a writing the client can understand;
The client is advised in writing of the desirability of seeking independent legal counsel;
The client is given a reasonable opportunity to seek independent counsel; and
The client gives informed consent in a writing signed by the client to the essential terms and to the lawyer's role in the transaction.
Does NOT apply to: ordinary commercial transactions in which the client routinely sells goods or services to the general public (buying groceries at a client's store; ordering a meal at a client's restaurant).
Applies to: the lawyer borrowing money from a client; purchasing property from a client; a client investing in the lawyer's non-legal business; the lawyer accepting an equity stake in a client's company as payment for fees.
Exception: if the client is already independently represented in the transaction, Rule 1.8(a)(2) is inapplicable in full (Comment [4]) — neither the written advisement to seek independent counsel nor the reasonable opportunity to seek it is separately required. The other conditions still apply, and (a)(1)'s full-disclosure requirement is then satisfied either by a written disclosure by the lawyer or by the client's independent counsel (Comment [4]).
Mnemonic: DRAW — Disclosed in writing · Reasonable opportunity to seek counsel · Advised in writing · Written signed consent.
Example 1
Ex. 1
Tom represents Ana in a landlord-tenant dispute. When Ana mentions selling her rental duplex, Tom offers to buy at fair market value. He emails a plain-language memo with the price and terms; Ana signs a purchase agreement the same day without seeking outside advice. The transaction violates Rule 1.8(a). Tom disclosed fair terms in writing, satisfying the first DRAW condition, but he never advised Ana in writing to seek independent counsel and gave her no reasonable opportunity to do so. All four DRAW conditions must be met. Tally what Tom put in writing against what he didn't — the memo is one DRAW letter of four.
Example 2
Ex. 2
Ben represents Carla in a contract dispute. Carla offers to sell her commercial warehouse. Ben discloses fair terms in writing, advises Carla in writing to seek independent counsel, and gives her two weeks. Carla declines and signs a standard purchase contract. The transaction still violates Rule 1.8(a). The signed purchase contract records agreement to deal terms, not informed consent to the essential terms and to Ben's role as buyer-lawyer. A signed deal-term writing doesn't satisfy the fourth DRAW condition. Match Carla's signature to the document under it — Ben cleared three DRAW conditions, and the fourth needs a different writing.
A signed record of deal terms isn't informed consent to the lawyer's role; both must appear in a writing signed by the client. A close personal friendship doesn't excuse the required formalities.
Tip
Questions · 2
Q 01ch10-e01
Question 1 of 2 · Rule 1.8(a)(2)
Attorney represented Client in a long-running property tax appeal. During the representation Client mentioned wanting to sell a vacant lot beside Client's home. Attorney offered to buy the lot, and an independent appraiser confirmed that the offered price matched fair market value. Attorney sent Client a plain-language letter setting out the price, the closing date, and every other term of the sale. Client signed a separate writing consenting to those essential terms and to Attorney's role as the buying lawyer. Attorney never told Client in writing that it would be wise to consult another lawyer about the sale, and no other lawyer advised Client on it. Is Attorney subject to discipline?
Keys 1 to 4 choose.