In a business transaction with a client, what must the lawyer disclose about the terms?

• A. All terms and risks of the transaction and related financial interest.
• B. Only the favorable terms.
• C. Terms are optional if the client agrees.
• D. Disclosures are not required.

Answer: (A)

When a lawyer enters into a business transaction with a client, the client must be fully informed about the terms and the potential risks, and the lawyer’s financial interest in the deal must be disclosed. This stems from the rule that requires fair and reasonable terms disclosed in writing, with the client advised to seek independent counsel and to give informed consent. In practice, disclosure should cover all aspects of the transaction—the terms, how it works, any risks, and exactly what the lawyer stands to gain or lose financially. The client should understand the nature of the transaction and have a reasonable opportunity to consult with independent counsel before agreeing. This transparency protects the client from undisclosed conflicts and ensures that consent is truly informed. Disclosing only favorable terms, making disclosure optional, or stating that disclosures aren’t required would undermine that protection and conflict with the rule.