The classic example of carelessness when giving an undertaking is on completion of a conveyance when the seller’s solicitor tells the buyer’s solicitor that the ‘usual undertakings’ will be given on completion, with the seller’s solicitor having overlooked the existence of a second charge. Needless to say, in that situation the solicitor is fully liable (and can only hope that he will be able to recover the funds from the seller).

Rule 24 of the Code of Conduct makes it clear that an ‘undertaking can be given orally or in writing, and need not include the words ‘undertake’ or ‘undertaking’. For example:

• contracts were exchanged on the sale of a property, but the deposit was to be paid a week later. The buyer’s solicitor therefore wrote saying ‘the deposit will follow by Monday 30 April’. However, the buyer was unable to fund the deposit which led to the developer rescinding the contract and complaining to the SRA. The solicitors argued that there had been no undertaking and that they were merely confirming their client’s instructions. The SRA disagreed and the solicitors (ie their insurers) had to pay the £54,000 deposit (by which time their client had disappeared to Thailand).

Likewise, take great care when giving an undertaking on your ‘client’s behalf’. For instance:

• in a matrimonial dispute, H was worried that W would take money out of a particular bank account. On W’s instructions, her solicitor wrote to H’s solicitor saying ‘our client has authorised us to give an undertaking on her behalf that she will not make any withdrawals from the account pending the determination of your client’s application... unless made with your client’s written consent’. W promptly withdrew £30,000, and H’s solicitors complained to the SRA that there had been a breach of undertaking. Not surprisingly, the solicitor argued that he had not given an undertaking for himself, but had merely given one on the client’s behalf. The SRA disagreed, saying what the solicitor should have done was to specifically disclaim any personal responsibility and make it clear that he was simply informing H’s solicitors of W’s intentions.

Never give an undertaking over which you do not have full control. For instance:

• the solicitor acting for a buyer of property wrote to the private lender who was funding the purchase saying ‘I am writing to confirm that the property... will not be sold or leased by Mr X without your written permission until the loan you made to him is repaid’. However, the client sold the property (using another solicitor) and the lender relied on the undertaking to claim £350,000 from the solicitors.

Do take great care with undertakings. In particular, if you are giving the undertaking on behalf of the client or if it relates to events over which you have no control, then specifically state that you are not assuming any personal liability and that you are merely passing on your client’s stated intentions. Source: Zurich@risk September 2008 .© Practical Lawyer