Eric is a real estate lawyer who assists individuals when purchasing or selling residential homes.Eric, along withhis friend Kelly, also owns a mortgage brokerage,EDOW Brokerage, though Eric, 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 Kelly.

Allen walks into Eric's law firm and asks Eric for legal assistance in buying a new house.Eric agrees to assist Allen and begins work on the file.As Allen does not have all of the money required to purchase the new house, part of the work Allen has asked Eric to do is to assist in arranging a mortgage for Allen's new home (Allen will negotiate the rate and Eric will complete the paperwork).Allen said to Eric 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 Eric,"why don't you apply toEDOW Brokerage and see what they can do for you - I have had many clients who are successful there."Allen takes this advice and applies toEDOW Brokerage.Later that day, Allen calls Eric to report the good news - a nice guy at EDOW Brokerage named Kelly has approved him at a 4.7% interest rate!Allen asks Eric to get in touch with Kelly and finalize the paperwork.

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

Discuss anyissues that you have with the above fact pattern.