Legal opinions — the essentials

A legal opinion, typically in letter form, is a document that sets out opinions as to matters of law. It is not legal advice, and should not be used as a substitute for legal advice. While opinions are expressed in the document, they are not a guarantee of a particular outcome.

The most common uses of a legal opinion include as a documentary conditions precedent, and in restructuring and insolvency scenarios. A legal opinion provides the addressee (usually a financial institution such as a bank) with information as to matters of law to enable the addressee assess the legal risks involved in a transaction. It is common place that a legal opinion is provided at the closing of a transaction (a “closing opinion”), ahead of settlement or drawdown of the first advance.

Customarily, a law firm issues a legal opinion to its own client, often the lender in a financing transaction. This is because, among other things, issuing a legal opinion to a party who is not a client of the law firm can raise issues of professional conduct, conflict of interest and breach of confidentiality.

This guidance note outlines the main purposes of a legal opinion, explains who are the typical addressees of a legal opinion, gives examples of when a legal opinion is used, considers the scope of a legal opinion, and provide some general comments relating to foreign law opinions, including when and why one may be required.

See Legal opinions — the essentials.

Drafting or reviewing a legal opinion

Legal opinions typically follow a set structure — they will start with an introduction:

• • that provides background information to the transaction; there will be a clear description of the parties involved;
• • matters relating to reliance (who can rely on the legal opinion) and disclosure (restrictions on disclosing the legal opinion) will be set out in an unambiguous manner;
• • there will be separate sections for the actual opinions as well as the assumptions and the qualifications upon which the opinions are based; and
• • matters relating to liability will be precisely stated.

This guidance note focuses on providing some key drafting points and tips so legal practitioners can properly follow the legal opinion structure and matters that need to be covered by the legal opinion.

When instructed to draft a legal opinion, legal practitioners can use the Lending — steps to be taken before issuing a legal opinion. While there are no one universally agreed set of steps that a legal practitioner must take before issuing a legal opinion, this checklist sets out some practical matters to guide a legal practitioner’s thinking.

A very common scenario is that a lender's lawyers will provide a draft legal opinion to the lender for approval before completion. Such a legal opinion is usually reviewed by the lender's in-house counsel.

With this in mind, this guidance note also focuses on providing practical tips for reviewing a draft legal opinion from the lender’s perspective. This will help legal practitioners provide feedback as well as assist in finalising the legal opinion.

See Drafting or reviewing a legal opinion.