Can a lawyer hire a current client (a building contractor the lawyer represents in a divorce) to build the lawyer's own house?

Plain-English summary

A lawyer who was representing a residential building contractor (X) in pending divorce litigation wanted to hire X to build the lawyer's own house. The lawyer had solicited bids from several builders, and X's bid landed in the mid-range. The lawyer proposed to use a written construction contract and to refer X to independent counsel of X's choice to review it, and asked what was required to enter the deal and what other precautions to take.

The committee concluded the lawyer could enter into the contract provided the requirements of Rule 1.8(a) were met. It restated the rule: a lawyer is not prohibited from entering a business transaction that is fair and reasonable to the client provided that (1) the terms are fully disclosed and transmitted in writing in a manner the client can reasonably understand, (2) the client is given a reasonable opportunity to seek the advice of independent counsel, and (3) the client consents in writing to the terms.

Applying that standard, the committee found that, assuming the contract was fair and reasonable to X and the lawyer fully disclosed all terms in writing, the lawyer's plan to give X the opportunity to have independent counsel review the contract before signing appeared sufficient to comply with the rules.

Currency note

This opinion was issued in 1997, before the South Carolina Bar's adoption of the 2005 revisions to the Rules of Professional Conduct. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can a lawyer hire a current client to do work for the lawyer?

A: The committee concluded yes, where the engagement is a business transaction with the client, provided the lawyer complies with Rule 1.8(a). It treated the contractor client building the lawyer's house as such a transaction.

Q: What does Rule 1.8(a) require for the deal?

A: Per the opinion, the transaction must be fair and reasonable to the client, with all terms fully disclosed in writing in understandable form, a reasonable opportunity for the client to consult independent counsel, and the client's written consent to the terms.

Q: Was referring the client to independent counsel enough here?

A: The committee found that, assuming fairness and full written disclosure, the lawyer's plan to give the client the opportunity to have independent counsel review the contract before signing appeared sufficient to comply with the rules.

Background and rules framework

The opinion interpreted South Carolina RPC 1.8(a), corresponding to Model Rule 1.8(a), which governs business transactions between a lawyer and a client and sets the fairness, written-disclosure, independent-counsel-opportunity, and written-consent conditions the committee applied.

Citations and references

Rules of Professional Conduct:

• South Carolina RPC 1.8(a) / Model Rule 1.8(a): business transactions with a client.

See also

• SC Bar Ethics Op. 05-02: Financing a Contractor Client's Home
• SC Bar Ethics Op. 07-04: Buying Charged-Off Debts From a Client

Source

• Landing page: https://www.scbar.org/for-lawyers/quicklinks/legal-resources/ethics-advisory-opinions/ethics-advisory-opinion-97-34/

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

UPON THE REQUEST OF A MEMBER OF THE SOUTH CAROLINA BAR, THE ETHICS ADVISORY COMMITTEE HAS RENDERED THIS OPINION ON THE ETHICAL PROPRIETY OF THE INQUIRER’S CONTEMPLATED CONDUCT. THIS COMMITTEE HAS NO DISCIPLINARY AUTHORITY. LAWYER DISCIPLINE IS ADMINISTERED SOLELY BY THE SOUTH CAROLINA SUPREME COURT THROUGH ITS COMMISSION ON LAWYER CONDUCT.

Ethics Advisory Opinion 97-34

Attorney plans to build a house. Attorney represents X, a residential building contractor, in pending divorce litigation. X, while working for another company, built a house for attorney 16 years ago. Attorney is familiar with X's building skills and would like to have X build the house. Attorney has requested bids from several builders and X's bid is in the mid-range of the bids received so far.

QUESTIONS:
Can Attorney enter into a contract with X to build attorney's home while attorney represents X in his divorce? If so, Attorney plans to have a written contract with X regarding the home construction and to refer X to other legal counsel of his choice to review the contract.

What other precautions should Attorney take to avoid ethical difficulties?

SUMMARY:
Attorney can enter into a contract with X to build attorney's home provided Attorney complies with the requirements of Professional Conduct Rule 1.8(a).

OPINION:
Rule 1.8(a) governs situations where a lawyer wishes to do business with a client. An attorney is not prohibited from entering into a business transaction that is fair and reasonable to a client provided: (1) the terms are fully disclosed and transmitted in writing to the client in a manner which he/she can reasonably understand; (2) the client is given a reasonable opportunity to seek the advice of independent counsel; and (3) the client consents in writing to those terms.

Assuming that the contract is fair and reasonable to X and that Attorney fully discloses all terms to X in writing, Attorney's plan of giving X the opportunity to seek independent counsel to review the contract before signing it appears to be sufficient to comply with the Rules.