Do It Perfectly And Still Get Sued

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Isn’t perfect better that good? In a perfect world, it might be. But, in our own, perfection may be flawed. We’re not thinking about the incremental cost of going from good enough to perfect. We’re not talking about the impossibility of achieving perfection (points beyond which being unattainable, because there is nothing more perfect than perfect). We’re not talking about different views as to what constitutes “perfect.” We’re talking about cutting disputes short when one chooses practicality over perfection.

We’re going to illustrate our view by way of a September 20, 2017 court decision dealing with interpreting an insurance policy. Insurance-adverse readers, don’t tune out at this point. This is not about insurance. It is about drafting and language. [Read more…]

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Is There A Limit To Waiving A Non-Waiver Clause?

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When we first wrote about the loophole in non-waiver clauses that recognizes parties can orally agree to waive such clauses even one that explicitly say that there can be no oral waivers, we got some notes expressing incredulity. After the reality set in, the notes started asking whether there were any limits to this “loophole.” We at Ruminations didn’t know how to answer until we came across a May 12, 2017 decision from the Texas Supreme Court in a case where one of the parties has this name: Boo Nathanial Bradberry. The decision can be seen by clicking: HERE. It ruled there was a limit and its reasoning makes pretty good sense. [Read more…]

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How Complicated Can We Make It?

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Last week, we presented a wonky piece about present value calculations and their use. We won’t repeat that or extend those thoughts this week, but within last week’s quantitative jungle was a qualitative thought. Basically, we showed that stepping through annual rent increases doesn’t really produce a much different “total rent” than “keeping it simple” by using a level, average rent over the term of the normal lease. Today, we will spit out some other places where “going complicated” or trying to “refine” the financial terms in a lease also show little benefit and some offsetting detriment.

Before we do so, here’s a little more about setting rent. Last week, we suggested that instead of doing a five year lease with per square foot rents of $10, $11, $12, $13, and $14 over the five years, using the average rent of $12 per square foot would be almost the same in “present dollars” as using the $1 annual increases. We thought a reader or two would point out that there are non-economic reasons to use a graduated rent table. We would point out, that aside from the gender clause (and the like), all provisions of a lease are economic. No reader pitched in. So, we’ll do so (a little) on our own. [Read more…]

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Wonky Ruminations About Present Value

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Everyone knows that a dollar received today is better than a dollar received a year from now. Many realize that it is advantageous to pay a dollar a year from now rather than pay it today. That’s the “time value of money.” It is also based on a pretty good, but not guaranteed, assumption that interest rates and inflation rates will be positive. Historically, that has been a good bet.

We’ve used the word “better” in the sense that most would understand, but “better” is actually in the eyes of the beholder. It is better for the recipient to get the dollar now, but that’s not the case for the payor. [Well, we’ve gotten that out of the way.]

So, which is better when it comes to paying or receiving monthly rent for a five year lease: (a) $12 per square foot of floor area throughout the term; or (b) $10 the first year, $11 the second year, $12 the third year, $13 the fourth year, and $14 the final year? After all, $12 per square foot is right in the middle, it is the average rent “figure” over the five year term. [Read more…]

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Are All Constructions Structural?

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Again, we ask: “What is a structure?” We say, “again,” because Ruminations explored (mined) this topic a little more than three years ago in a blog posting titled: “What Is A Structural Component? Do You Know?” To see it (anew or again), click: HERE.

We’ll start with the take-away for today. It is that we might want to define important words that we ponder at times. “Structure” and the form “structural” come to mind. After all, if you’ve been in business of “reading leases (or other real property agreements)” for any decent period of time, you’ve faced the need to answer whether some “thing” is a structure. For sure, buildings are structures. Are fences or retaining walls structures? Perhaps the answer is fact-dependent. Perhaps we need to call an expert in the mold of Justice Potter Stewart (who wrote, in 1964, “I shall not today attempt further to define the kinds of material I understand to be embraced within that shorthand description [‘hard-ore pornography]; and perhaps I could never succeed in intelligibly doing so. But I know it when I see it, and the motion picture involved in this case is not that.”). [Read more…]

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More Boring Insurance Stuff

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Yes, today’s posting will be boring and perhaps a little dry. And, to add insult to injury, nothing in it will be earth-shattering. But, knowledge is power. And, even if you don’t want to be powerful, you certainly don’t want to be drafting documents and making business agreements involving insurance without knowing what is available and what is possible. Do you? We didn’t think so.

Yes, today we write about insurance, and whenever we do so, we repeat this caveat: “Find and rely on a genuine insurance expert. This stuff is not intuitive.” Our primary goal is to let our followers know enough about insurance to realize that they and we don’t know enough. A secondary goal is to get those of us who include insurance requirements in our documents to know that last year’s (or even last week’s) text may no longer be what we would like to have written. Lastly, for those who buy insurance, today’s blog posting might induce you to call and say hello to your insurance broker or other advisor. [Read more…]

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Can You Tell The Difference Between The Bagel And the Hole?

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Yes, this will be a complaint; one we think is shared by many readers. Have you ever worked on a deal with someone who, as we say in New York, confuses the hole for the bagel itself? [Years and years ago, we might have said, “donut,” but it seems that you can now buy the “hole” by itself. Think about that. Are we really buying a “hole”?]

Ruminations offers two examples of the kind of people accused of this approach to deal making. The first is the person who had a “bad” experience in a deal and is driven, compelled, obsessed, preoccupied, and engrossed to make sure that if the agreement being discussed covers anything at all, it absolutely must have language that will make sure the disturbing experienced is never experienced again. As we see it, however, the problem is that the “driving” experience either came out of the facts in the earlier situation or the perceived “drafting shortfall” in the earlier “nightmare” agreement and was really a proxy for whatever went on. And, all too often, the prior situation was for a different kind of deal – basically, the deal on the table and the “nightmare” deal have little, if anything, in common. Yes, in the prior deal, had the parties been required to wear fur mittens, they wouldn’t have gotten frostbite. But, in this “put up a building on the equator” deal, requiring fur mittens actually interferes with getting the project completed. [Read more…]

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To A Hammer Everything Looks Like A Nail

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Knowing what you don’t know is a good thing. A practical application of that statement comes when you are trying to figure out how a particular jurisdiction will treat a particular agreement such as a lease. There are some legal principles that suffuse state law throughout the United States. The law of damages is NOT one of those principles. Yes, the generality of “damages” is pretty much the same all over, but the details are not. Here’s an example from a just-decided Colorado case from its Supreme Court.

The question that court considered was whether a seller could really make the choice of remedies provided-for in the following contract clause: [Read more…]

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