Informed Written Consent

Paragraph (a)(3) of Rule 1.8 sets the third condition for a lawyer's business deal with a client: the client “gives informed consent, in a writing signed by the client, to the essential terms of the transaction and the lawyer's role in the transaction, including whether the lawyer is representing the client in the transaction.”¹ That one sentence makes five demands. The consent must be informed, it must appear in a writing, and the client must sign the writing. It must also reach two things: the essential terms of the deal and the lawyer's role in it.

The first two conditions ask the lawyer to act. The lawyer must make the terms fair and reasonable and disclose them in writing in a form the client can reasonably understand, and must advise the client in writing that independent counsel is desirable and give the client a reasonable opportunity to consult one.² Paragraph (a)(3) asks for something the lawyer cannot supply alone, which is the client's own decision. The rule leaves that decision with the client, whose money or property is at stake, and it requires the decision to be real: informed, documented, and attributable to the client personally. A deal that the lawyer drafted, explained, and then reported as agreed would rest the client's assent on the word of the party with a stake in how the report reads.

The standard is stricter than the way people ordinarily accept a proposal. Saying yes aloud does not satisfy it, and neither does the lawyer's own memo of the conversation, because the writing must be signed by the client.³ A signature also cannot rescue a bad bargain. Rule 1.8(a) is a consent-plus rule: consent is necessary, and the terms must also be fair and reasonable to the client.⁴ The first subsection below covers what makes consent informed and what the signed writing must contain. The second covers the lawyer's role in the deal.

Each qualifier in paragraph (a)(3) answers a different weakness in an agreement between a lawyer and a client. “Informed” answers the risk that the client agrees without understanding. “In a writing signed by the client” answers the risk that the only record of the agreement is the lawyer's version of it. The two objects of consent, the essential terms and the lawyer's role, answer the risk that the client approves a price without knowing who stands on the other side of the table.

The Model Rules define informed consent as a person's agreement to a proposed course of conduct after the lawyer has communicated adequate information and explanation about its material risks and the reasonably available alternatives (Rule 1.0(e)). The comment to Rule 1.8 follows that definition. It tells the lawyer, when necessary, to discuss the material risks of the transaction, including any risk presented by the lawyer's own involvement, and the reasonably available alternatives, and to explain why independent legal advice is desirable.⁵ The work therefore falls on the lawyer, because the client's agreement counts only after the lawyer has communicated.

Client autonomy explains the requirement. In United States v. Agosto, the Eighth Circuit explained that a party may waive the right to counsel unhindered by a conflict of interest, provided the waiver is knowing and intelligent.⁶ A client who agrees without knowing the material risks and alternatives has not made a knowing choice. A court applying the code of professional responsibility made the same point from the lawyer's side: the lawyer must disclose the facts and also the conflict of interest between lawyer and client, and after that disclosure it is for the client to decide whether to retain additional counsel.⁷

A bare announcement that a conflict exists, followed by the client's yes, does not do this work. The comment asks for the risks and the alternatives, including the risk that the lawyer's own stake may tilt the deal.⁸ The risks tell the client what could go wrong, among them that the person describing the deal profits from its terms. The alternatives tell the client that the lawyer's proposal is one option among several. A client offered the chance to pay for legal work with shares, for example, learns that a cash fee paid over time, a different lawyer, or no deal at all remain open.

How much explanation is adequate depends on the client. The answer turns on the circumstances, on the client's experience with legal matters and with the subject at hand, and on whether the client has independent counsel. A sophisticated client who is independently represented presumably has been adequately informed, while a client who seldom uses legal services deserves a more thorough account.⁹ The measure is the client the lawyer actually has. A first-time founder who has never read a stock agreement and a corporate treasurer who negotiates them weekly can receive the same proposal, and the explanation that informs the treasurer may leave the founder with a signature and little understanding.

The consent must also reach the right object. Paragraph (a)(3) ties it to the essential terms of the transaction, which means the particular deal on the table.¹⁰ What the client gives up, what the lawyer pays or provides in return, and what happens if the arrangement ends early are the kinds of terms the client must have in view. A signature beneath a general statement that the lawyer may invest in the client's business shows that the client signed something, but it does not show that the client agreed to any particular price or share. The written disclosure under paragraph (a)(1) supplies the terms in a form the client can understand, and the signed consent records the client's decision about those terms.

The form of the consent is where students most often slip. Ordinary conflicts of interest are governed by a lighter requirement, that informed consent be “confirmed in writing,” which lets a lawyer explain the risks, hear the client agree aloud, and afterward send a writing that records the agreement. Paragraph (a)(3) asks for more, and the two standards differ in who writes and whose act the writing records:

Under “confirmed in writing,” the lawyer writes after the fact, the client may have agreed only aloud, and the writing is the lawyer's account of what the client said.
Under “in a writing signed by the client,” the client's own signature appears on the document, so the client's agreement is expressed in a record the client personally adopted.

The stricter standard suits a setting in which the lawyer is the counterparty. A document the client signs puts the client's assent to specific terms in the client's own hand, while a lawyer's confirming message is the account of the party with a stake in the deal. Rule 1.8(a) is accordingly a consent-plus provision, which requires informed consent in a writing signed by the client and adds the requirement that the terms be fair and reasonable to the client.¹¹ The usual exam error is treating the lawyer's follow-up email as enough, when that email satisfies only the weaker standard.

Hypothetical Illustration

A lawyer who represents a landscaping company wants to accept five percent of the company's stock for future legal work. In a meeting with the owner, the lawyer describes the risks, including that holding stock gives the lawyer a personal interest in the company's decisions. She lays out the alternatives of a cash fee paid in installments or a different lawyer, and she explains why a second lawyer's review is desirable. She then hands over a document stating the number of shares, the work she will do in return, what happens to the shares if the engagement ends early, and that she will become a shareholder. The owner takes the document home, reads it, and returns it signed. The consent is informed, it covers the essential terms, and it sits in a writing the client signed, so (a)(3) is met. The transaction must still satisfy the other conditions.

Nothing short of the signature will do. Paragraph (a)(3) names the form the consent must take, a writing signed by the client, so a client who pays the first installment, raises no objection, and attends the next meeting has given no consent the rule recognizes until the client signs.¹² An oral agreement fails for the same reason, and a flawless explanation supplies only the informed half of the condition.

The Lawyer's Dual Role

Paragraph (a)(3) asks the client to consent to two objects, and the second is the easier one to overlook: the client's signed, informed consent must reach “the essential terms of the transaction and the lawyer's role in the transaction, including whether the lawyer is representing the client in the transaction.”¹⁵ The preceding subsection dealt with terms, and this one deals with role. A lawyer who does business with a client can occupy two positions at once. The lawyer is a party to the deal, with a financial stake in how its terms come out, and the lawyer may also be the client's adviser on those same terms. The clause forces that fact into the open by naming the representation question directly, so the signed writing must say whether the lawyer is or is not acting as the client's lawyer in the deal.

A client decides how far to rely on a statement by asking who is making it. Advice from a lawyer with nothing at stake deserves one degree of trust, and an explanation from the person on the other side of the table deserves another. A lawyer who says nothing about role while speaking in the familiar voice of the client's own counsel invites the client to assume that the lawyer's loyalty runs to the client in this deal as it does in every other matter. That assumption is costly because the lawyer in a deal often shapes it, choosing the structure, drafting the documents, and explaining what they mean, and each of those choices can tilt toward the lawyer without the client noticing. The role clause works in both directions. A lawyer who is only a counterparty must still say so in the writing, because a longtime client may otherwise take the lawyer's help with the paperwork for granted.

The comment to the rule identifies where this danger peaks. The risk to the client is greatest when the client expects the lawyer to represent the client in the transaction itself, or when the lawyer's financial interest otherwise poses a significant risk that the representation will be materially limited by that interest. In that situation the lawyer must comply with Rule 1.7 as well as with Rule 1.8(a).¹⁶ The two rules ask different questions. Rule 1.8(a) lists specific safeguards for the bargain, and Rule 1.7(a)(2) asks the broader question whether the lawyer's own interest would materially limit the representation.¹⁷ A lawyer who is both a party and the client's adviser has exactly that interest, so in the dual-role case the lawyer must satisfy both rules at once.

The comment also says what the dual-role disclosure must contain. The lawyer must disclose the risks of acting as both legal adviser and participant in the transaction, such as the risk that the lawyer will structure the transaction or give legal advice in a way that favors the lawyer's interests at the expense of the client, and the lawyer must obtain the client's informed consent.¹⁸ Those risks are concrete. A lawyer who drafts a loan agreement picks the interest rate, the collateral, and the default terms, then explains them to a client who has no yardstick for calling them standard. A natural alternative to describe in such a deal is that the client have a different lawyer handle the client's side while the lawyer acts only as a counterparty. A client who has been told only that the lawyer will look after things has received reassurance and none of the information on which informed consent rests. The lawyer's exposure also does not wait for a loss, because a lawyer may be disciplined for representing conflicting interests even if no harm to the client results.¹⁹

Hypothetical Illustration

A lawyer who handles a client's business filings agrees to lend the client money for new equipment. She drafts the promissory note and the security agreement herself, picks the interest rate and the collateral, and tells the client, who has never borrowed on this scale, that she will take care of him. Her papers say nothing about her interests as lender being opposed to his, nothing about the chance that she will shape the terms in her own favor, and nothing about his option to have another lawyer handle his side. The client has not been told what role she is playing, so any signature he gives cannot be informed consent to her role. Because he expects her to act as his lawyer in the deal while she is also the lender, the risk the comment treats as greatest is present, and she must satisfy Rule 1.7 along with Rule 1.8(a).

The assurance in that scene is the instinct that costs points. A promise to look after the client feels like loyalty, yet it tells the client that the lawyer is speaking as an adviser, so it deepens the reliance the rule exists to guard against and leaves out the risks that make the reliance dangerous. The usual exam error is to treat the conditions of Rule 1.8(a) as the whole analysis, when a lawyer who is acting as the client's lawyer in the deal must also clear Rule 1.7. The loan is a convenient vehicle for the point, and whether a loan to a client engages other parts of Rule 1.8 is a separate question that the closing section of this chapter sorts out.

Both scenes involve a loan from a lawyer to a client, and they differ in what the client was told about the lawyer's position and in who stood on the client's side of the table. In the second scene the dual-role problem is solved by removing the dual role. The remaining conditions still run, and the terms must be fair and reasonable to the client, but the client's independent representation changes how they apply. Paragraph (a)(2) becomes inapplicable, the full disclosure under (a)(1) may come from the lawyer or from the client's independent counsel, and the fact of independent representation is relevant in judging whether the terms were fair and reasonable.²⁰

Suppose a client, fully informed, insists that the lawyer handle both sides of the deal. The comment anticipates the question and limits its answer to some cases: the lawyer's interest may be such that Rule 1.7 precludes the lawyer from even seeking the client's consent to the transaction.²¹ The reason lies in what consent can do. Informed consent supplies information, and a client who understands a risk may relax many protections. It does not make a lawyer's judgment independent, and a lawyer whose own gain depends on the client's agreeing cannot advise the client whether to agree without that gain pulling on the answer. The comment gives no formula and says only that in some cases the interest is too strong. When it is, the lawyer's way forward is to give up the adviser's role. The lawyer acts only as the counterparty, tells the client in writing that independent counsel is desirable, and allows a reasonable opportunity to retain it, which returns the deal to the independent-counsel route taught earlier in this chapter.²²

Informed Signed Consent

The Lawyer's Dual Role

Endnotes24