Legal Opinions in Business Transactions (Excluding the Remedies Opinion)
May 2005 (October 2007 Printing - as revised)


Copyright 2005 and 2007 by the State Bar of California. Permission is hereby granted to members of the Business Law Section and purchasers of this Report to make copies or extracts of it in connection with their practice of law but not for any commercial purpose. The statements and views in this Report are those of the collective membership of the Committee and not necessarily those of the State Bar of California. This Report is made available with the
understanding that neither the State Bar of California nor the Committee is engaged in rendering legal or other professional services in publishing it. If legal advice or other expert assistance is required, the services of a competent, professional person should be sought.

Table of Contents

Contributors, Notes and Acknowledgments
I. Purpose of this Report
II. Definition and Purpose of a Legal Opinion
III. Legal Standards Applicable to Preparation of an Opinion
  A. Standard of Care
    1. Generally
    2. Customary Practice
  B. Fraudulent or Misleading Opinions
  C. Ethical Issues Relating to the Provision of Opinions to Nonclients
  D. Inside Lawyers
IV Preparation of the Opinion Letter
  A. Preliminary Considerations
  B. Problem Areas and Inappropriate Subjects for Opinion Requests
    1. Opinions That Are Not Cost-Effective
    2. Inappropriate Scope
    3. Confirmations of Fact; Negative Assurance
    4. Opinions Regarding Issues of Significant Legal Uncertainty
    5. Other Problem Areas: Fraudulent or Misleading Opinions and the Limits of Professional Competence
  C. The Time to Negotiate the Opinion Letter
  D. The Form and Elements of the Opinion Letter
    1. Introductory Matters
    2. Description of the Transaction, the Lawyer's Role, Reasons for the Opinion and Definitions
    3. Diligence, Factual and Legal
    4. Expression of the Opinion
    5. Special Matters
    6. Signature
    7. "Back-Up Memorandum" and Internal Review
V. Certain Common Opinions and Special Issues Under California Law and Practice
  A. Corporate Status
    1. Special Note on Due Incorporation/Organization
    2. Validly Existing
    3. Good Standing in California
    4. Good Standing in Other Jurisdictions
  B. Corporate Power and Corporate Action
    1. Corporate Power to Conduct Business and Enter into Agreement
    2. Due Authorization, Execution and Delivery
  C. No Violation Opinion
    1. No Violation -- Articles and Bylaws
    2. No Violation -- Material Agreements
    3. No Violation -- Court Orders
    4. No Violation -- Applicable Law
    5. No Violation -- Margin Regulations
    6. Investment Company Act Issues
    7. All Filings and Consents Obtained in Connection with the Transaction
    8. Special Note on Absence of Litigation
  D. Capital Stock
    1. Authorized Capital
    2. Duly Authorized
    3. Validly Issued
    4. Fully Paid and Nonassessable
    5. Reservation of Shares
    6. Outstanding Equity Securities
  E. Selected Blue Sky and Federal Securities Law Issues
    1. General Considerations
    2. Exemption from Federal Registration or State Law Qualification -- Private Offerings
    3. Exemption from Federal Registration or State Law Qualification -- Resales
VI. Special Issues
  A. Contracts Not Governed By California Law
    1. Advising on the Law of Another Jurisdiction
    2. Opinions on Choice-of-Law Provisions
    3. Limits on the Parties' Freedom to Adopt Choice-of-Law Provisions
  B. Selected Matters Governed By the Laws of Other States
    1. Delaware Corporate Law
    2. Other State Laws
VII. Opinions not Normally Requested or Given
  A. Title to and Transfer of Assets
  B. Fraudulent Transfers and Other Insolvency-Related Opinions
  C. Opinions Referenced Elsewhere in this Report
  A. Appendix A -- Glossary of Defined Terms
  B. Appendix B -- Table of Authorities


Appendix C -- Bibliography
Contributors, Notes and Acknowledgments / Table of Contents