Law Practice Essentials

The commentary to Rule 3.4-13 in the Code of Conduct outlines specific types of transactions covered by the Rule.

Borrowing from Clients:
You must not borrow money from clients unless the client is a lending institution which lends money to the public (e.g. a bank, credit union or treasury branch), or the client is a related person who received independent legal advice.

Lending to Clients: 
If you make loans to clients, you must fully explain the conflict of interest to the client and recommend that the client obtain independent legal representation. You must then obtain the client’s consent after these two requirements have been satisfied.

Compassionate Loans: 
If you want to make a loan to a client who is in dire financial circumstances, you can only make the loan on a no-interest, no charge, basis due to the inherent inequality of bargaining positions. It is permissible for you to be repaid from settlement or transaction proceeds. However, such loans are prohibited if your financial stake in the outcome is such that you could lose objectivity.

Guarantees:
You must not personally guarantee, or otherwise provide security for, any debt of a client unless:

• the lender is providing funds solely for you or a related person;
• the transaction is for the benefit of a non-profit or charitable organization and you are a member or supporter of the organization; or
• you have entered into a business venture with a client and the lender requires personal guarantees from all participants in the venture as a matter of course and you have otherwise complied with the Code.

Gifts and Bequests:
If you prepare a will for a client, you must not accept any gift or bequest that is more than nominal. This includes gifts and bequests to your family members and other firm members. A client who wants to make a gift or bequest to you should have an independent lawyer prepare the will.

You may draft a document making a gift or bequest to yourself or another firm member where the client is your family member or another firm member. 

You may draft a client’s will to include a clause directing that the executor retain your services in the administration of the client’s estate, but only if the client expressly instructs you to do so. Express instructions from the client are also required if the will contains a clause dealing with your fees, whether you are acting as executor, the estate’s lawyer, or both.