ILA – Signing on the Dotted Line

Published in Orchard and Vine Magazine on: February 12, 2016

How do you feel about acronyms? Sometimes it can be a fun guessing game. How about this one… ILA? Independent Learning Academy…Interior Logging Association…and my personal favorite, Independent Legal Advice.  Okay, maybe not as exciting as the International Lime Association, but still worth talking about.

Most of you have probably heard of ILA (Independent Legal Advice) before. Some of you may have been told that you must have ILA before signing a contract or a bank guarantee. So, what is ILA? The need for ILA often arises if a person is not represented by a lawyer and is at risk of not fully understanding the consequences of a transaction. In certain situations, you may need to receive legal advice from an independent lawyer who is free of any bias. Neither that lawyer nor any of that lawyer’s clients can have an interest in the matter requiring the ILA. In certain other situations, you (or your lawyer) may require that someone you are contracting with must obtain ILA.

ILA is commonly required if you will be guaranteeing a loan for someone else or you are entering into a domestic family law contract such as a separation agreement or a cohabitation agreement. ILA can also play an important role in employment contracts, when negotiating severance packages, and prior to signing corporate documents as a minority shareholder or to document other corporate transactions between shareholders.

It may not always be clear if you should obtain ILA or if you should have someone who you are about to contract with get ILA. ILA can certainly protect you as a person entering into a contract. But, on the flip side, it can also protect the person you are contracting with by helping to ensure the enforceability of the transaction. For example, we have all heard of situations where someone will try to avoid a contract by stating, “I didn’t understand what I was signing.” While this is a difficult argument to successfully make, it will be even harder to establish if an independent lawyer certifies that legal advice was provided and that advice was understood by the person who is now taking the opposite position. Going one step further, a person can attempt to avoid a contract by stating “I understood what I was signing, but I was pressured to sign and did not act freely.” Once again, ILA will directly Impact the strength of that argument if an independent lawyer certifies their opinion that the person entered into the transaction voluntarily.

Now that you know what ILA is and when you may need it, let’s talk about what you should expect when you see a lawyer for ILA.  Lawyers have a codified standard of care that must be followed in providing legal services and dealing with clients. When you receive ILA, you are the lawyer’s client and the same duty is owed to you as an “ordinary” client.  Your lawyer should be honest, candid and explain the legal aspects of the transaction to you and ensure you understand what you have been told. Your lawyer will also confirm that you have capacity to enter into the transaction and that you are not experiencing any undue Influence or coercion to proceed.

It is not always easy for a lawyer to provide ILA, especially if the person seeking ILA feels very passionate about a transaction and does not wish to hear any potential negative consequences from a lawyer they really don’t know that well. To make sure your lawyer acts appropriately and you get the advice you need, be prepared to disclose all relevant facts and provide information to your lawyer when he or she asks you questions to better understand the transaction.

Often, the work completed by a lawyer providing ILA will be limited to reviewing and explaining the provided documents and ensuring you understand the documents. If this is the case, the lawyer will advise you of the limited extent and scope of their services. The work to be completed would likely not involve the negotiation of different terms, although you may be able to extend the scope of the work completed to include this.

There are many benefits when it comes to ILA. Whether you choose to represent yourself in a transaction, are required to obtain ILA by another party or want to have someone you are contracting with receive ILA before signing on the dotted line, take the time to find an independent lawyer with knowledge in the area of law in which your transaction, provide all of the necessary documentation, frankly answer the questions that are asked of you and ensure you obtain the answers you require so you enter into enter the transaction voluntarily with a full understanding of the legal consequences.