What is a Legal Opinion Letter?
A legal opinion letter is a document written by an attorney to serve as a formal opinion on a particular point or points of law. This document is requested by the client and generally is a prerequisite for a deal to move forward. In some instances, the demands for a legal opinion letter can even come from a third-party/investor and/or be required by securities law requirements and/or regulations.
A legal opinion could be sought in connection with a variety of matters , such as the validity or enforceability of a contract, the completeness of a collection of corporate documents, and/or the legal authority of an organization to enter into a transaction. Though legal opinion letters are not required by the law, they are extremely prevalent in the legal industry.
Key Components of a Legal Opinion Letter
A legal opinion letter is a complex document that typically conveys generally accepted standards of opinions. The exact content of an opinion will vary depending on the situation, but there are a number of components that are generally accepted. The following provides an overview of these components.
Typical structure. Legal opinion letters typically follow the same pattern, regardless of the size of the deal. The introductory paragraph states the subject and date of the opinion letter. The second paragraph includes the qualifications and limitations of the opinion, which should include a disclaimer that makes clear to whom and for what purpose the opinion is being rendered as well as limiting the opinion to the laws of a particular state or states. The third paragraph provides the factual basis for the opinion(s, and the final paragraphs list the various opinions in numbered paragraphs.
Introduction. The introductory paragraph of the letter states the subject and the date of the opinion letter.
Qualifications and limitations. The second paragraph should disclose and comply with all relevant assumptions, limitations, exclusions and qualifications.
Factual basis of the opinion. The third paragraph should include a description of the information or data as to which the opinions in the opinion letter were given. Underlying opinions often range from information set forth in the records and notes of the law firm to information provided by the attorneys or clients or by third parties.
Opinions themselves. The various opinions themselves are separately numbered in a legal opinion letter. Some typically included opinions relate to the organization and existence of the company, standing, authority, and valid and binding contracts. Depending on the specific agreement and circumstances, opinions with respect to intellectual property, non-conflict, and litigation may also be included in the letter.
How to Prepare a Legal Opinion Letter: A Step-by-Step Guide
Aside from the obvious headers, a legal opinion letter typically contains five essential sections. It should contain:
- The scope of engagement in which you must state facts and sources of your information (and then confirm that an agreement is in place as such);
- A description of the findings in which you break down what you are opining to;
- The discussion of the findings, which in turn should have every single legal basis for the opinion set forth, evidence of said authority (caselaw, textbooks, etc.), exceptions to general rules, differences in opinions, things in nature that don’t match the law, etc.
- Limitations are very important. You should always put potential limitations on the legal opinion letter. In a nutshell, you should describe what you know about the persons and things you are opining to, which, for example, the legal opinion would indicate it has not studied the credit worthiness when it comes to a well-healed company,
- Legal opinion letters almost always end with a question asking if the opinion satisfactorily responds to the request for opinions (obv. answer is no).
Once you do this, you should probably have someone else read it for accuracy and make sure you are not missing anything before sending it out.
Common Pitfalls
Common Mistakes to Avoid When Writing and Reviewing a Legal Opinion Letter
This is not a time to "wing it" or try to be clever. Anything less than a clear and accurate opinion can create post-closing angst, exposing you to liability claims. When preparing a legal opinion letter, the following are some common mistakes to avoid: Remember that the opinion letter is fundamentally a risk allocation instrument; thus, focus on providing the most precise advice possible on the identified issue. You can use footnotes to explicitly highlight your assumptions, caveats and qualifications. At the end of the day, the goal is to cover all the bases and avoid inadvertently taking on unnecessary risk. The most important mistakes to avoid creating a false sense of security for your reader and making sweeping pronouncements without a careful analysis. Keep in mind that while your client may believe a legal opinion letter is a measure of certainty, we know better.
A Sample Legal Opinion Letter
To: Me
Re: Mortgage Note
In connection with the Note described above, I have reviewed the following documents:
• mortgage;
• UA Uniform Commercial Code Financing Statement and UCC-3; and
• certificate of title.
This opinion is based upon my review of the documents listed above and on the basis of our discussions. I assume that these documents are all complete, authentic, and correct and that the notes and mortgages are enforceable and valid obligations of the relevant parties, and I have made no attempt to independently verify any of these documents except as may be set forth in this opinion.
In our opinion, the Note and mortgage are secured by a valid "perfected security interest" in the property described in the mortgage and the Security Agreement. We base this statement on the following:
• the UA Uniform Commercial Code Financing Statement covering the collateral was filed with the State Tax Department of Pennsylvania on November 16, 2010 and has not been amended or terminated since that date;
• the Financing Statement is presently effective and will remain effective until it is amended or terminated;
• one of the entities covering the collateral described in the Financing Statement is the sole owner of the collateral;
• the Financing Statement is sufficient to continue the perfection of your security interest in the collateral for the period after the Effective Date until its expiration date , assuming that the collateral is neither removed from the State nor subject to another lien or encumbrance;
• at the request of your entity, we have no reason to believe that the Financing Statement has been amended or terminated; and
• the entity continues to own its interest in the collateral and has the legal right to pledge, encumber, and mortgage the collateral rights in the collateral described in the Financing Statement in favor of and for the benefit of your entity.
We May Have Other Opinions
Our opinion is limited to the opinion expressed above, although our director may issue other opinions pertaining to the transaction described in this letter.
Our opinion pertains only to the law of the State of Pennsylvania. We do not opine as to the laws of Delaware and/or any other jurisdiction, and we do not opine as to the steps required to create, perfect, and/or preserve your security interest in the collateral under the laws of the State of Pennsylvania.
A Legal Opinion Letter vs. Other Legal Opinions
A legal opinion letter is not to be confused with a legal brief, memo or opinion. All four provide legal information, but differ in purpose, style and content. A legal opinion letter is meant to deliver a formal opinion that foreshadows the final conclusion of a matter. Legal briefs are often an extremely long and detailed argument or presentation of a case. A lawyer may draft a legal memorandum to clarify the issues in a case or for future reference. A typical legal opinion letter is much shorter, typically only a few pages in length, and generally concisely summarizes the relevant facts, issues and supporting cases. While the objective of a legal opinion letter may change over time, it is essentially a piece of persuasive writing, one that can be extremely valuable to an attorney or business client, thereby making its impact last a lifetime.
Conclusion and Best Practices
In conclusion, the drafting of legal opinion letters is an integral part of legal practice that requires attention to detail, a firm understanding of subject matter, and the ability to clearly communicate complex legal concepts. The essential elements of a good opinion letter have been outlined above and should be closely followed to ensure the document is effective and meets the needs of the client.
Providing a clear and concise overview of the relevant laws and the opinions being given, as done in the sample legal opinion letter above , is key to helping clients understand the full implications of the legal issues at hand. It is also important to be transparent about the limitations of the opinion and to manage expectations regarding the scope of the review.
When in doubt, it is always better to seek guidance from senior partners or mentors, as the consequences of an inaccurate legal opinion letter can be significant. Through experience, gain a sense of when further advice is needed and act accordingly to protect yourself and your client and provide a thorough opinion letter.