Did the seller's attorney act unethically in altering the customary terms without informing the buyer's attorney?
Even though this is a sharp practice on the part of the seller's attorney, I don't think an attorney has a duty to disclose the fact that changes were made to the customary terms. No affirmative misrepresentation was made, and the buyer's attorney may not be justified in assuming the draft contract contains the customary terms. The situation might be different if the form was presented as a model form prepared, for example, by the ABA or a state bar. In that case, there may be a reasonable expectation that the boilerplate terms are those set forth in the model form. But in other cases, I think the attorney to whom the contract was tendered takes the risk that it does not contain the expected terms. That attorney should either read it, put it through the "compare" feature of a word processor or stand-alone program that will compare it to standardized terms, or ask the other lawyer to make an affirmative statement about whether any changes were made to the customary terms.
What if changes are disclosed, but not the consequences of those changes?
3. The attorney requesting a change fails to disclose ripple effects.
The first attorney asks for a change in a term, which the second attorney agrees to, but the first attorney does not inform the second attorney that the change in that term affects a term in another part of the agreement that is not favorable to the party represented by the second attorney. An example might be a choice of law provision, where the law in the chosen jurisdiction affects another part of the agreement. Does the first attorney have a duty to inform the second attorney that the change in language may affect another part of the agreement?
I think there is no such duty. One attorney does not have to educate another as to the legal effect of a contract provision, as long as no affirmative misrepresentation is made. In fact, the lawyer's duty of competent representation in Rule 1.1 would require the recipient to recognize the ripple effects.
These problems are exacerbated when the contract is drafted not through an exchange of drafts over time, but in real time, using a program such as Google Docs. The first attorney can suggest a change by typing it in, and the other attorney can assent or not. The alteration itself is clearly disclosed, but not the effect that the change in paragraph 7.2 has on paragraph 14.4. This is a significant drawback to real-time drafting, for such repercussions can best be discovered by reviewing the document in its entirety. Alas, the pace of modern business may not grant us this luxury. An attorney must therefore know the transaction well, including knowledge of how all the parts fit together.
Finally, what if an agreed term is omitted altogether?
4. The final contract omits a term the parties agreed to.
The parties agree to the terms of an agreement. One attorney reduces the agreement to writing and both parties review and sign it. Later, the first attorney realizes that an important term has been omitted. The second attorney acknowledges this "scrivener's error," but refuses to modify the writing, which purports to contain the final and complete agreement of the parties. Should the second attorney agree to reform the contract to include the missing provision?
The Restatement (Second) of Contracts says the answer is "yes." Section 155 provides:
Where a writing that evidences or embodies an agreement in whole or in part fails to express the agreement because of a mistake of both parties as to the contents or effect of the writing, the court may at the request of a party reform the writing to express the agreement, …
Calamari and Perillo state the rule more succinctly in § 9.31 of their Contracts hornbook: "Contracts are not reformed for mistake; records are." Note that this situation must be distinguished from the situation in which the parol evidence rule applies. The parol evidence rule provides that once the parties have adopted a writing that they intend to contain their final and complete agreement, then evidence may not be offered of terms that supplement or contradict it. The distinction is in the intent of the parties. In the case governed by the parol evidence rule, the party opposing inclusion of the term claims that while the parties may have discussed the term during negotiations, they did not intend it to be a part of their final agreement; in the mistake case, the party admits that they agreed to it and intended to include it in the writing, but inadvertently omitted it.
ABA Informal Opinion 86-1518 addressed this issue, concluding that under Rules 1.2 and 4.1, an attorney has a duty to disclose the omission of the term to the other attorney and to agree to reform the writing. An attorney might maintain that he informed his client of the omission, and while the attorney would of course be willing to disclose it, he had a duty to zealously represent his client, who insisted on taking advantage of the situation. The opinion concluded that because the client had already agreed to include the term in the contract, the attorney need not even consult the client before agreeing to reform the contract. Curiously, the Maryland State Bar Association Committee on Ethics addressed the same issue in Ethics Docket 89-44 and, without mentioning the ABA opinion, reached the contrary conclusion. However, the Maryland opinion did warn the attorney to explain to the client, pursuant to Rule 1.4(b), information necessary to permit the client to make an informed decision, including the fact that the other party may bring a reformation action, the likelihood of success of such an action, and the cost of defending it.
The attorney's duty to read the draft contract is excused when there is fraud or mistake. Nevertheless, as a matter of preventive law, the attorney should review the contract - perhaps with the help of a computer program - before it is signed. Also, the attorney should provide the client with an opportunity to review it. Not only can review by a second set of eyes be helpful in detecting problems, but if the attorney victimized by these situations faces a client's malpractice claim, it will be helpful if the attorney gave the client an adequate opportunity to review the contract, for most of the problems could be detected by the review of a layperson.