Don't undervalue your advice

Friday, 15th April 2016

It was Ralph Emerson who once wrote that "it is one of the blessings of old friends that you can afford to be stupid with them." This sentiment may not have changed in the 150 years since Emmerson penned those words. However, it is worth being aware that the law can be unforgiving towards those who provide mistaken (albeit informal) advice.

The scenario

Here's the scenario: let's say you have expertise in a certain area and a friend comes to you for a bit of advice. Perhaps you are a surveyor and your friend is in the process of buying a house. Maybe you are a financial advisor and a neighbour is wondering whether to change their pension plan. It might simply be that you are a bit of a dab hand under the bonnet and your colleague needs a new car.

Keen to help them out, you give them a bit of assistance. Perhaps you accompany them on a viewing, or have a quick flick through their pension documents. Maybe you join them on a test drive. You give your friend some advice, and relying on your guidance, they go ahead. You have helped a friend out and your friend has got a bit of free advice. It's a win-win situation.

Or is it? As time goes by, it becomes apparent that things were not actually quite how you saw them: you missed something that you would normally have spotted. Your friend is now not so pleased. Stuck with a property, pension or car that was not what they had bargained for, your friend starts asking you some difficult questions.

The law

What are your rights in this situation? No contract was made. No fee was charged. Surely, your friend cannot sue you for the informal (albeit mistaken) advice you gave them?

Well, somewhat surprisingly, the law can be quite unforgiving in this area. For instance, in the case of Chaudhry v Prabhakar [1989] 1 WLR 29, the Court of Appeal found that a friend who had given advice on buying a car was liable in the tort of negligence when it turned out that the car the claimant bought was not roadworthy. No fee was paid for the advice. The defendant was not even a mechanic. However, the Court found that the defendant knew that the car's bonnet had been replaced and he should have asked the seller whether the car had been involved in an accident. The defendant did not and, as the claimant relied on his advice, he was liable to compensate.

The issue of one friend offering free advice to another recently came before the courts in the case of Burgess and another v Lejonvarn [2016] EHC 40. Here, the defendant (an architect) provided assistance to the claimant (a friend and business contact) with the landscaping of his garden. However, the project went disastrously wrong and the parties' friendship took a turn for the worse. In fact, so bad was the breakdown between the parties, the claimant sought to recover the additional cost of completing the project from the defendant.

What was the outcome? Well, although there was no formal agreement between the parties and the defendant never asked for a fee, the court found that their relationship was sufficiently close to entitle the claimant to recover the sums from the defendant.

Lessons to be learnt

Although Emerson's sentiment on friendship may still be shared by many, these cases provide two examples of where bad advice to friends proved to be very expensive. If you are keen to protect yourself from a similar fate, there are two practical steps you can take. First, if you are being asked to give professional advice, agree a formal contract and a fee. If, however, it is a less formal situation and you want to give some casual guidance, emphasise that you are not giving advice that is intended to be relied upon. After all, if friends want to rely on your advice, perhaps they should pay for it.

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