When it comes to legal decisions, what can we handle ourselves and when do we need professional help?
One of the traps in legal matters is that in this data age there is an abundance of information online. There is also the age-old reliance on “legal advice” from a friend or relation who knows someone who had a problem just like the one you’re trying to solve. The biggest risk with “do-it-yourself” legal work is not what you know, but what you don’t know. It is our blind spots that often lead us into serious difficulty. A competent professional who brings these issues to light can be worth their weight in gold.
As an example, we have a client who is an intelligent business professional, nationally recognized for entrepreneurship and business acumen. He recently made a private loan to a third party and found what appeared to be a legally binding promissory note on the internet. Armed with this tool, our client prepared what appeared to be a legally binding loan agreement.
Unfortunately, the first time a lawyer was consulted was when the third-party did not honour the payment obligation. Upon our review of the promissory note we found that there were serious legal problems jeopardizing our client’s ability to collect.
The first issue was that the downloaded document was an American form, limiting the enforceability of the note in Canada. The second challenge was that the note indicated funds were being loaned at “prime.” Many of us have had mortgages at prime or pay interest on our credit cards at prime plus some number and it would seem to be an understandable term.
The courts in Canada do not agree. In a number of cases, Canadian courts have ruled that when the “prime rate of interest” is not readily ascertainable, the promissory note is void for uncertainty. The method of achieving certainty in the note is to state that the loan is being made at the prime rate as determined and documented by a specifically named institution, including variations. Our client’s note simply used the word “prime” without reference to the prime rate charged by any particular institution, and therefore was void.
The cost of trying to repair the damages is typically much greater than the investment of consulting a legal advisor prior to engaging in a transaction.
If in doubt, contact a trusted professional advisor. A little preventative maintenance and expense upfront can often avoid a significant and more expensive problem at a later date.
Roger Greenwood is a partner with RDM Lawyers LLP. Comments or inquiries can be sent to email@example.com.