You are in the pub. You have a pint in your hand and are discussing the football match. Your team started well, but somehow you ended up losing. What went wrong? If only your striker had scored that chance. If only your defender had made that tackle. After the event, it is easy to work out what went wrong. It is easy to find someone to blame.

That, in essence, is what happened in The Football League v Edge Ellison [2006]. On 15 June, 2000, the Football League negotiated an amazing deal with ONdigital for the television rights to Football League matches – £315m over three years for the rights to screen games such as Hartlepool versus Barnet and Hereford versus Grimsby. But then it all went wrong. In March 2002, ONdigital went into administration and, in October 2002, it descended into liquidation. At the time of its demise, it still had £178.5m to pay the Football League.

The Football League went to the metaphorical pub and ordered the metaphorical pint to discuss the gist. So, what went wrong? If only the League had obtained a guarantee from ONdigital's parent companies, Granada and Carlton. If only its solicitor had advised us to do that. After the event, it is easy to work out what went wrong. It is easy to find someone to blame and, in this case, that someone was the Football League's legal adviser – Edge Ellison.

The case came to trial in February this year. The Football League's complaint was simple: Edge Ellison should have advised the League to obtain parent company guarantees from Granada and Carlton. The response from Edge Ellison was equally simple: the firm had no duty to provide that advice.

The judgment

As is now well known, the judge, Justice Rimer, decided in favour of Edge Ellison (subject to a couple of minor issues, discussed later). He drew the distinction between legal advice and commercial advice. While a lawyer is obviously expected to be able to advise on the law, a solicitor is ordinarily under no duty to advise on commercial issues. This principle has been clearly stated in two Privy Council cases – Clark Boyce v Mouat [1994] and Pickersgill v Riley [2004].

In the Edge Ellison case, Justice Rimer stated that the issue of parent company guarantees was "an exclusively business one". He pointed out that the Football League's representatives were all experienced businessmen. Indeed, he observed, they had been "hand-picked for the task". They were all aware of the risk of corporate insolvency and they all knew about the availability of parent company guarantees. They had, he concluded, a "full understanding of the commercial considerations".

In the circumstances, Justice Rimer concluded that Edge Ellison did not owe a duty of care to the Football League to raise the issue of parent company guarantees. He accepted that some solicitors in Edge Ellison's place may have done so, but this did not create a duty upon the firm to have done so. The principle stands that on commercial issues, the client knows best and the solicitor is entitled to rely upon the client's expertise. Indeed, he said, it would be "pointless, or even an impertinence" for the solicitor to offer commercial advice (as concluded by Lord Scott in Pickersgill).

Caveats

Whereas a solicitor will not ordinarily owe a duty to advise on commercial issues, they will undoubtedly owe a duty to advise on legal issues. On legal issues, the lawyer knows best (in theory). However, it may not take much for a commercial issue to become a legal issue.

For example, on 7 June, 2000, ONdigital presented its bid document to the Football League. Page nine contained the following provision: "ONdigital and its shareholders will guarantee all funding to [the Football League] outlined in this document." This paragraph was a model of ambiguity. Did it mean that the shareholders, Granada and Carlton, were offering formal guarantees? Or did it simply mean that ONdigital had the commercial backing of Granada and Carlton? It simply was not clear.

A week later, Edge Ellison was involved in finalising the short-form agreement between the Football League and ONdigital. Clause 18 of the agreement cross-referred to ONdigital's bid document of 7 June. According to Justice Rimer, Edge Ellison should have reviewed the bid document. If the firm had done so, it would (or should) have seen the ambiguous clause on page nine. It should then have discussed the legal ramifications of this clause with the Football League. This would have involved Edge Ellison asking about the desirability of obtaining parent company guarantees.

As can be seen, what was previously a commercial issue had become a legal issue. Whereas Edge Ellison had previously owed no duty, it did bow owe a duty.

Similarly, following the completion of the short-form agreement, the parties had to endeavour to agree a long-form agreement. For the same reasons, this also should have involved a clarification of the bid document. Once again, a commercial issue had become a legal issue.

According to Justice Rimer, however, neither of these breaches of duty caused any loss. The Football League was therefore awarded a nominal £4, ensuring htatthe last laugh belonged to Edge Ellison.

Broad conclusions

The Football League is a useful example of the rule that a solicitor has no generally implied duty to advise on commercial issues.

This general rule can be overridden by express agreement. If the retainer states that the solicitor will advise on the commercial desirability of a deal, then that is what he or she must do. It is important, therefore, that retainers are not worded in general terms.

Similarly, beware what is written in pitch documents. It is always tempting to offer a 'complete business service' or some similar such sentiment. Be careful not to overstate your abilities.

The general rule can also be overridden by circumstance. Lord Scott in Pickersgill made it clear that if a client is "a youthful client, unversed in business affairs" the solicitor may have a duty to explain the commercial wisdom, as well as the legal consequences, of a transaction.

The line between commercial advice and legal advice may be very fine. In The Football League, as soon as there was a reference to a 'guarantee' in a legal document, Edge Ellison had a duty to advise.

When advising on a document, therefore, it is essential that solicitors also read all other documents that are mentioned in that document. Football League is authority for the principle that failure to read all cross-referenced documents is likely to be regarded as negligent.

Finally, if a solicitor does spot some commercial flaw in a transaction, point it out. If Edge Ellison had done that, it might have saved its client more than £100m and avoided expensive litigation. Moreover, when you are in the pub, pint in hand, you will not be bemoaning a loss, but celebrating a victory.

Peter Mansfield is a partner at CMS Cameron McKenna.