An acquaintance of yours, Tom, is a real estate lawyer who assists individuals when purchasing or selling residential homes.Tom, along withhis friend Lisa, also owns a mortgage brokerage,ABC Brokerage, though Tom, due tohis busy work schedule at his law firm,is only a silent partner (i.e. a partner whoonly provides capital, but does not contribute to the day-to-day decision making of the brokerage) and leaves the operation ofthe brokerageto Lisa.

Scott walks into Tom's law firm and asks Tom for legal assistance in buying a new house. Tom agrees to assist Scott and begins work on the file. As Scott does not have all of the money required to purchase the new house, part of the work Scott has asked Tom to do is to assist in arranging a mortgage for Scott's new home (Scott will negotiate the rate and Tom will complete the paperwork). Scott said to Tom that he has researched several different banks but that he cannot afford the 5% interest rate they all want to charge him - he can only afford a 4.8% rate or below.

"No problem" says Tom,"why don't you apply toABC Brokerage and see what they can do for you - I have had many clients who are successful there." Scott takes this advice and applies toABC Brokerage. Later that day, Scott calls Tom to report the good news - a nice lady at ABC Brokerage named Lisa has approved him at a 4.7% interest rate! Scott asks Tom to get in touch with Lisa and finalize the paperwork.

The paperwork is completed, the transaction closes smoothly and Scottlives happily ever after.

Discuss anyissues that you have with the above fact pattern.