Lawyer-client relationship: When is it established?

It would appear self-evident that the first thing a lawyer should know when providing legal services is who the lawyer’s client is. Interestingly, this question is not as self-evident as one might think – there are many examples, in common law and other jurisdictions, where the courts have had to resolve disputes over the question of whether a lawyer-client relationship has been created.

The question is complicated by the practice whereby lawyers provide legal opinions in favour of third parties; namely, persons who are not clients – at least not in a contractual sense. For example, a law firm might issue an opinion in favour of all of the banks in a lending or underwriting syndicate. Alternatively, a law firm acting for the vendor of a business might agree to extend the benefit of the vendor due diligence report that the law firm has prepared to the purchaser (see China Business Law Journal volume 5 issue 5, page 101: Liability caps).

The column considers two questions: (1) when will a lawyer-client relationship be created?; and (2) when will a lawyer or law firm be liable to third parties (i.e. non-clients)? These questions are examined from a common law and a Chinese law perspective.

When will a lawyer-client relationship be created?

This question is a very important one, as there are several implications that arise if a lawyer-client relationship is created. Some of these implications arise by law; other implications arise by contract. For example, in common law jurisdictions, a lawyer owes a fiduciary duty to a client under the body of law that is called “equity” (see China Business Law Journal volume 3 issue 1, page 94: Duty or obligation?). A fiduciary duty has two core requirements: first, lawyers must avoid conflicts of interest (see China Business Law Journal volume 1 issue 4, page 78: Cases, matters and conflicts of interest); second, lawyers must not profit from their position unless the client consents.

In addition, duties to clients will either be imposed on lawyers under the professional rules or be implied by contract. For example, lawyers owe a duty of confidentiality and a duty of disclosure to their clients, and they also have an implied contractual duty to take care.

A further implication of a lawyer-client relationship in common law jurisdictions is that the client will be able to claim legal professional privilege in relation to communications with the lawyer (see China Business Law Journal volume 4 issue 9, page 78: Privilege).

Another way of asking this question is as follows: what conditions need to be satisfied before a contract between a lawyer and a client is created? Let’s consider how this question is resolved in common law jurisdictions and in China.