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NJ: Lawyers Duties to Adverse Parties

Davin, L.L.C. v. Daham, 329 N.J. Super. 54, (App. Div. 2000)

NJ Underlying landlord tenant action and property dispute

Student Contributor: Coleen Gaedcke

Facts: The defendants argued that the owner’s attorney owed them a duty to disclose “any factual and/or legal impediments which might follow or encumber the subject lease.” They also argued that the owner’s attorney owned the defendants a duty not to include a covenant of quiet enjoyment in the lease where there was a pending foreclosure on the property.

Issue: Whether the owner’s attorney owed the defendants a duty to notify them of his client’s financial difficulties when negotiating the commercial lease?

The Ruling: The Appellate Court found that the owner’s attorney had an affirmative obligation to be fair and candid with the defendants and not to include a covenant of quiet enjoyment in the lease when he was aware and involved in the pending foreclosure. They also said the owner’s attorney was obligated to advise his clients that they were responsible for notifying the defendants of the foreclosure.

1) When determining whether the owner’s attorney owned the defendants a duty the court “must weigh and balance the following factors: the relationship of the parties; the nature of the attendant risk; the opportunity and ability to exercise care; and the public interest in the proposed solution.”

2) In addition, the Rule 1.3 of the Rules of Professional Conduct state that “attorneys may owe a duty of care to non-clients in situations in which the attorneys know or should know that the non-client would rely on the attorney’s representations, and the non-client is not too remote from the attorney to be entitled to protection.”

3) Furthermore, an attorney has a duty to advise his clients to disclose facts that are material to a transaction and if the clients fail to follow the advice, the attorney has the right to decline further representation of the client.

The Lesson: The absence of an attorney-client relationship does not necessarily protect an attorney from owing a duty to a non-client third party, therefore it is important to remember that an attorney must always act with candor and honesty even though disclosure of significant facts that go the essence of a transaction might not be in their client’s best interests.



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Posted in: New Jersey