This report ("Report") is a commentary on the use of legal opinions in business
transactions, with particular consideration of the impact of California law and practice on such
opinions. It has been prepared by the Corporations Committee (the "
Committee") of the
Business Law Section of the State Bar of California (the "
Business Law Section") and issued by
the Committee with the approval of the Executive Committee of the Business Law Section. This
Report supersedes the opinion report prepared by the Committee in 1989 (the "
which itself updated and restated the opinion report prepared by the Committee in 1982.2 This
Report is not intended to prescribe specific forms of legal opinions expressed in opinion letters
or required procedures for rendering them, but rather is intended to reflect current opinion
practice in California as understood by the Committee. The views set forth in this Report
represent a consensus among the Committee members listed on pages (i) and (ii) of this Report,
but do not necessarily reflect the positions of individual members or their respective firms or
Since the 1989 Report was published, there have been several important contributions to
the commentary on legal opinions and their content. In 1991, the Legal Opinions Committee of
the American Bar Association (the "
ABA Committee") published its Third-Party Legal Opinion
Report, including the Legal Opinion Accord (the "
Accord").3 Rather than summarizing opinion
practice, the Accord proposed to govern the terms and conditions of opinions that adopted the
Accord. An Accord opinion would therefore incorporate all assumptions and conditions set forth
as standard terms of the Accord, without having to restate those assumptions or conditions.
1992, the Business Law Section issued a report designed to provide guidance to members of the
State Bar of California who wished to adopt the Accord for opinions.
5 The Accord did not gain
widespread acceptance in California but is still used as a resource in preparing opinion letters,
much as the 1989 Report was intended to be used.
In 1998, the TriBar Opinion Committee issued its report on Third-Party Closing Opinions
TriBar Report")6 and the ABA Committee issued its Legal Opinion Principles (the "ABA
").7 In 2002, the ABA Committee published an update to its Guidelines for the
Preparation of Closing Opinions (the "
ABA Guidelines"),8 which were originally published in
conjunction with the Accord. Unlike the Accord, these reports were intended to provide
guidance on opinion practice rather than to delineate a set of standards that could be adopted to
govern an opinion. The foregoing reports, along with the 1989 Report, have become important
sources of information regarding opinion practice for lawyers.
9 In 2000, the American Law
Institute published the Restatement (Third) of the Law Governing Lawyers (the "
which includes a number of sections relating to third-party legal opinions.
The 1989 Report, the TriBar Report, the ABA Principles and the ABA Guidelines, as
well as this Report, summarize what the drafters of those reports observe to be customary
practice. Those reports and this Report are not intended to have a prescriptive effect on the
standards applicable to legal opinions for purposes of liability. Nonetheless, as acknowledged by
the Restatement, customary practice on such issues as the scope of diligence underlying third
party opinions is articulated in bar association reports, treatises, and articles.
In 2002, the Business Law Section and the Real Property Law Section of the State Bar of
California published a collection of their various opinion reports (the "
2002 Opinion Reports").12 Even prior to that, the Business Law Section had initiated an overall project to update or replace the segments of the 2002 Opinion Reports originally prepared by standing committees of the
Section, including the Committee. In that connection, the Section issued its report on Third-
Party Remedies Opinions, prepared by the Section's Opinions Committee, in September 2004
Remedies Report").13 The Uniform Commercial Code Committee of the Section is in the
process of updating its UCC 1988 report. This Report should be read in conjunction with the
Remedies Report and the 2002 Opinion Reports, as updated.
This Report is based upon California statutory and case law and the Committee's view of
current opinion practice among California lawyers. Accordingly, readers are cautioned that the
discussion of legal principles and suggested opinion language contained in this Report should be
evaluated in light of any subsequent legislation or judicial decisions and the normal evolution of
customary opinion practices.
For convenience, this Report uses the following definitions and conventions in describing
opinion practice: (1) following the convention of the Remedies Report and the TriBar Report,
opinion giver" refers to the lawyer or law firm in whose name an opinion letter is signed,
opinion preparer(s)" refers to the lawyer(s) in the law firm who prepare an opinion letter, and
opinion recipient" refers to the addressee of the opinion letter and others, if any, expressly
granted permission by the opinion giver to rely on the opinion letter;
15 (2) the business entity16
that is the subject of the opinion is referred to as the "Company"; (3) the contracts and/or other
written instruments evidencing obligations of the Company that the opinion addresses are
collectively referred to as the "
Agreement," which includes both the singular and plural as
applicable to a specific situation; and (4) the list of contracts and other written instruments that
are the subject of specific portions of the opinion are referred to as the "
As used in sample texts of opinion segments set forth in this Report, capitalized terms are
"markers" for the actual corresponding term as defined in the opinion letter itself. For a glossary
of the defined terms used in this Report, see Appendix A.
1 Comm. on Corps., State Bar of California, 1989 Report of the Committee on Corporations Regarding Legal
Opinions in Business Transactions
, 45 BUS. LAW. 2169 (1990) [hereinafter 1989 Report]. Back
2 Comm. on Corps., State Bar of California, Report of the Committee on Corporations Regarding Legal
Opinions in Business Transactions
(1982), reprinted in 14 PAC. L.J. 1001 (1983). Back
3 Comm. on Legal Opinions, American Bar Association, Third-Party Legal Opinion Report, including the
Legal Opinion Accord, of the Section of Business Law, American Bar Association
, 47 BUS. LAW. 167 (1991)
Accord]. The 1991 Third-Party Legal Opinion Report includes not only the Accord but also
"Certain Guidelines for the Negotiation and Preparation of Third-Party Legal Opinions." These guidelines
have been superseded.
See note 8. Accordingly, references in this Report to the Accord do not include the
guidelines published in 1991 with the Accord.
4 The Accord does provide for "private ordering," which allowed for modifications to the Accord's provisions
for a specific opinion letter.
5 Business Law Section, State Bar of California, Business Law Section of the State Bar of California Report on
the Third-Party Legal Opinion Report of the ABA Section of Business Law
(1992). The 1992 report also
offers a summary of the differences between positions taken in the 1989 Report and the Accord.
6 TriBar Opinion Comm., Third-Party "Closing" Opinions, 53 BUS. LAW. 591 (1998) [hereinafter TriBar
7 Comm. on Legal Opinions, Section of Business Law, American Bar Association, Legal Opinion Principles,
53 BUS. LAW. 831 (1998) [hereinafter
ABA Principles]. Back
8 Comm. on Legal Opinions, American Bar Association, Guidelines for the Preparation of Closing Opinions,
57 BUS. LAW. 875 (2002) [hereinafter
ABA Guidelines]. Back
9 In January 2001, the Business Law Section of the State Bar of California issued a statement advising that the
1989 Report was out of date on some issues, and recommended that lawyers use the 1989 Report in
conjunction with the Restatement, the ABA Principles, the ABA Guidelines and the TriBar Report.
10 RESTATEMENT (THIRD) OF THE LAW GOVERNING LAWYERS (2000) [hereinafter RESTATEMENT]. Back
11 RESTATEMENT § 95, comment a. Back
12 Business Law Section & Real Property Section, State Bar of California, CALIFORNIA OPINION REPORTS
(2002). The 2002 Opinion Reports include the following reports:
13 The Remedies Report is available on the Section's website at
14 The Committee's 1989 Report is superseded by this Report and the Remedies Report. Back
15 See Appendix 1 ("Glossary") to the Remedies Report. Back
16 Many of the specific opinions covered in this Report will be applicable to transactions undertaken by
business entities other than corporations. As it relates to the form of entity and the concepts governing them,
however, this Report assumes that the Company is a corporation and specifically addresses issues applicable
to California corporations. Practitioners rendering opinions where the Company is a partnership or limited
liability company are encouraged to consider the separate reports specifically applicable to such entities,
which are included in the 2002 Opinion Reports.