Also known as: adverse interests · adverse party interest
Written by attorneys · grounded in primary & secondary sources — see below
An interest opposed or contrary to that of another person or entity. The presence of such an interest can affect consent requirements in trust administration, the reasonableness of reliance on statements in tort, the validity of powers of withdrawal, and the disqualification of counsel in matters involving conflicting clients.
David creates a revocable trust naming South Freight as trustee and Irene as a beneficiary. David later seeks to revoke the trust without Irene's consent. Because Irene holds no adverse interest that would block revocation, the trustee must honor David's direction under the trust terms.
Eli, a financial advisor, tells client Maria that a structured note is the safest retirement investment while receiving undisclosed commissions. Maria does not realize Eli's financial incentives conflict with her own goals. Because Maria believes Eli lacks an adverse interest, she may reasonably treat the opinion as implying supporting facts.
Select any source to read its text and confirm it supports the definition.
A firm represents a husband, wife, child, and their insurer in a personal injury matter. When the child later sues the insurer, the firm faces actual adversity between clients. The court disqualifies the firm despite attempted waivers because the serious conflict and confidentiality risks cannot be cured by screening.
Irene holds a right to withdraw thirty percent of trust principal each year, but the CFO's written consent is required. The CFO's bonus depends on keeping capital reserves high, creating an adverse interest. Irene therefore cannot exercise the power without that consent.
A buyer knows the seller's agent stands to gain a commission only if the deal closes. The agent misrepresents the property's condition. The buyer may still be justified in relying on the misrepresentation even though the agent holds an adverse interest in the transaction.
An interest is adverse when it would give the holder a reason to withhold consent to revocation. Under the Uniform Trust Code, a settlor may revoke without the consent of any person holding such an interest.
Supporting sources
The recipient's belief that the speaker lacks an adverse interest makes it reasonable to interpret an opinion as implying supporting facts. If the recipient knows of the adverse interest, the opinion is less likely to carry that implication.
Supporting sources
When actual adversity develops between jointly represented clients, disqualification is likely even if some clients purport to waive the conflict. Serious confidentiality risks and the appearance of disloyalty usually prevent effective waivers.
Supporting sources
A power of withdrawal is not presently exercisable if it requires consent from a person whose financial stake creates an adverse interest, such as a CFO whose bonus depends on preserving trust reserves.
Supporting sources
A recipient may still be justified in relying on a fraudulent misrepresentation of fact even when believing the maker has an adverse interest in the transaction.
Supporting sources