Chicken Little Syndrome And How A Deal Gets Done

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Fair Warning – here’s another Ruminations screed. The sky will fall if you don’t read on. OK, not really, but we were feeling left out. It seems that’s the way some of us talk to each other.

“Tell them that if they don’t sign by noon tomorrow, I’m going to lease the space to someone else!” “If you don’t agree to my insurance language, this deal is dead.” “We have four other people who badly want this space, and each will pay more than what’s in our deal.”

The specter of each possibility is the threat. It doesn’t matter how probable it is that, late in a deal, one party or the other will “walk” if the deal is signed a week from now rather than “now.”

Yes, it’s possible that there are other prospective tenants lurking around the property and it is possible that other landlords are tossing great offers at your prospective tenant.

But, these things are true so rarely, that no one believes these threats. Yet, landlords and tenants keep trying.

Granted that under the right circumstances and with confirming facts to support the urgency of the plea, such threats should be taken seriously. After all, in a very, very small, yet disturbing number of cases, landlords and tenants walk from a late-stage deal to take another, more attractive one. That really doesn’t happen much. More often, a tenant is negotiating for a space that has been “sucking wind” and the likelihood that four prospects have shown up all at once after 18 months is quite low. It could happen, but so could two planes crash mid-air. Yet, brokers and landlords drag that old song out far too often. And, we’re not going to tag just brokers and landlords with that charge; tenants try to sing that song as well. [Read more…]

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What Does An Exclusive Use Clause Have In Common With The Affordable Care Act?

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What a diff’rence a word makes, twenty-four little meanings.

Chief Justice Roberts, last Thursday, in his majority opinion in the Affordable Care Act case, did a much better job than Ruminations has ever done in explaining how courts interpret statutes or agreements. We’d like to think that he (and the other five justices joining the opinion) learned the law by reading Ruminations, but even we don’t have that quantum of chutzpah.

We’ll save readers the effort of reading that Court’s decision in King v. Burwell, the health care law case decided last Thursday. It was decided on the basis that courts don’t interpret words or phrases independently of the host statute or agreement; they interpret entire statutes or agreements. Yes, once a court finds a word or a group of words as capable of having more than one meaning, it will interpret that word or those words in the context of, and in a way that is consistent with, the overall objective of the statute (or agreement). That’s been a regular Ruminations theme. [Read more…]

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Crafting Agreements In A Virtual Realty World

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What does it take to craft a lease provision (or, for that matter, any agreement provision) from scratch? What does it take to review any agreement provision? Can anyone just wake up one morning and honestly declare: “I can do that”? Ruminations doesn’t think so. It may be possible for just anyone to wake up one morning and decide she or he can be President of the United States, but it just doesn’t work when it comes to “doing” leases or other agreements.

Without doubt, the more knowledge someone has, the better the chance the agreement will do its job. And, that means knowing about the subject matter – the business terms and the context – of the agreement, not just the common nuts and bolts of a lease. Today, we’re going to use leases for our examples. Readers can “translate” those examples to any other kind of agreement. When we write, “context,” readers can think about “how the property works” – what is unique about the property or the parties, and consequently, the deal. Even if one memorized every word of the world’s best lease form and even remembered the order of those words and where every punctuation mark went, she or he wouldn’t have a workable lease. Ruminations could launch a diatribe on the subject, but knowing our readers, we’d be preaching to the choir. [Read more…]

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How Many Ways Can Boilerplate Clauses Be Written? How Many Good Ways?

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“Except in the most extraordinary circumstances, [courts] hold sophisticated parties to the terms of their bargain.” [That comes from a (2014) 7th Circuit United States Court of Appeals decision.]

Today’s posting will last more than a single cup of coffee. Brew a fresh pot before starting.

The actual agreement drafting examples that follow are not ones that will cause rioting in the streets. As today’s “headline” suggests, they come from part of the “boilerplate” of their parent agreements. We are using them for a number of reasons (laziness is among them). One important one is if someone can’t draft “boilerplate” to read one way and only one way, how can that person get the “one time” provisions to “say what they mean, and mean what they say.” [Read more…]

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Let’s Change Every Word Of The Proposed Lease And Send It Back To the Other Side

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One technique Ruminations and other blogs use is to write only about what they know. That minimizes the risk of being wrong and gives the impression that the writer has figured everything out. Yes, that time-honored technique hides the truth.

If you’ve found the disclaimer at the bottom of our “front page,” you’ll see that our goal is to trigger a discussion or discussions. To a greater extent than we could have imagined, we’ve achieved some piece of that goal. We get comments on the Ruminations site and many more through Linked In and similar sites. We also get direct emails and telephone calls.

Today, in violation of the first principle revealed above, we’re going to step out of our blogger’s shell and confess our inability to know where to “draw the line” when it comes to preparing agreements or preparing comments (suggested changes) to those agreements. And, in keeping with the second principle above, we’re going to urge readers, as Ernest Tubb and Loretta Lynn sang (and Dean Martin closed his shows with), to “keep those cards and letters coming in.” That’s enough prologue. Here’s what we can’t figure out. [Read more…]

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I Paid For Replacement Cost Insurance Coverage, Where Is the Rest Of My Money?

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We were Ruminating about the reasons some people, instead of asking for “replacement cost” insurance coverage, ask for “full replacement cost” or “100% replacement cost” coverage. That made us think about the difference between a quart of milk and a full quart of milk. We don’t have any better answer than anyone else, so that was a dead-end for a Ruminations blog posting. Fortunately, those thoughts led us to today’s topic. So, our Ruminating was not for naught.

What is “replacement cost” coverage and what other kinds of property insurance coverage levels are there? We’ll start with the second question first. There are two basic ways a loss to insured property can be valued: (1) based on its replacement cost; and (2) based on its actual cash value (ACV). [Read more…]

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What Representation? – I Thought It Was Over When I Delivered The Deed.

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Last week, we put tried to put down a foundation for understanding the deed merger doctrine. In its simplest (but very inadequate) formulation, it stands for the proposition that once a buyer accepts a deed to the purchased property, whatever promises, representations, warranties or the like preceded the deed are “history.” At least, that’s what sellers would like the doctrine to be. A more appropriate explanation as to what happens when property is conveyed by a deed is the following: “When a provision in a deed is certain and unambiguous, it prevails over an inconsistent provision in a contract of purchase to which the deed was given.” [Johnson v. Ware (1943) 8 Cal.App.2d 204, 206.]

It’s all a matter of intent – what did the parties (buyer and seller) intend to happen? Therefore, what the deed merger doctrine really says is that where it can be shown that there was no intent to preserve an earlier promise, representation, etc., those promises, representations, etc. become no longer actionable once the deed is delivered. [Read more…]

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The Urge To Merge: What Happens To My Bargained-For Protections After The Closing?

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Ruminations has explored the thorny area of integration clauses and the limits of the parol evidence rule in the context of contracts. [If you don’t believe us, click HERE or HERE or HERE to see if we’re fibbing.] We haven’t heretofore look at the same question in the context of the interplay between a purchase agreement and the deed to which such an agreement gives birth. Today, we do. A cautionary warning would be in order. As much as we wanted to stay out of the “weeds,” that didn’t entirely work out, and what follows turned out to be a little “wonky.”

One of the branches of the tree sometimes named “the deed merger doctrine” is often described as follows: “Where a deed is executed in pursuance of a contract for the sale of land, all prior proposals and stipulations are merged and the deed is deemed to express the final and entire contract between the parties.” [There is an entirely different branch, one having to do with the implied combining of multiple tax lots into one lot, but that’s not the kind of “deed merger” being explored today.] It’s too bad that the coverage of today’s real property law school courses have been trimmed from “what they used to be” because too little time is now devoted to understanding the actual extent of such “mergers by deed.” Just like we learned in prior Ruminations postings when it came to the limitations of the parol evidence rule, the common formulation of the deed merger doctrine set forth above is “overstated” because “[t]he rule that prior expressions are merged into the deed is not as broad and absolute as some abbreviated statements of the doctrine might indicate.” [Read more…]

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