Independent Legal Advice is required when you are entering into a legal agreement and must be taken by an alternate solicitor or Chartered Legal Executive. ILA is mandatory where a party is being placed at risk but not receiving a benefit from entering into the transaction, this could be in transactions such as personal guarantees, transfer of equity or employment settlement agreements.
Usually, ILA is provided in person, so that the signing of the document can be witnessed by the independent advisor; however, more recently it has become acceptable to receive independent legal advice online via video calls through applications such as Zoom, Skype or Microsoft Teams.
The third-party formality is required to protect you from entering a transaction without knowing the potential risks involved. The independent advisor ensures that you are not being “induced” (persuaded or convinced) into the transaction. If inducement was the case, the security or guarantee may be unenforceable. Additionally, if the ILA is not executed correctly, there may be a claim in negligence as per Royal Bank of Scotland v Etridge (No 2) [2001] UKHL 44.
Royal Bank of Scotland v Etridge (No 2) [2001] UKHL 44
In this case, the House of Lords set out the minimum requirements that must be followed by lenders where a third-party provides security for another person’s borrowing. This is most commonly seen in marital relationships where, for example, the husband gives a guarantee for a loan being made to his wife.
In Etridge, several homeowners had mortgaged their properties to a bank in order to secure a loan for their businesses. The homeowner’s wives had signed the security agreements but had no direct benefit from the loan. The wives argued that they had been under undue influence to sign the agreements and therefore the agreements should be declared void.
Independent legal advice had not been sought by the wives and therefore it could not be proven that the wives provided full and informed consent when agreeing to the loan. Once free consent is certified, the lender’s security is protected through the presumption of “expression of a person’s free will”.
How can Jamieson Alexander Legal help?
Our solicitors can assist with any independent legal advice and are happy to have an initial call to discuss how we may be able to help.
If you would like to discuss any of the above or would like our help, please contact Abbie Audrain on 0330 460 6098 or abbie@jamiesonalexander.co.uk or the Head of Banking & Finance Litigation at Jamieson Alexander Anastasia Ttofis on 0330 460 6090 or anastasia@jamiesonalexander.co.uk
Junior Paralegal