A Lesson in Absurdity.

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Well, I’ve written more words about the Office Depot case than did the Georgia Court of Appeals. What case? – read the posts of July 25 and 28.

So, this time, I’ll start with the Court’s words themselves: “At base, Office Depot argues that any breach violation – no matter how wrong or far fetched – triggers the termination right.”

What did the Lease say? This is what it said:

Breach of Landlord’s Leasing Covenant. In the event Landlord violates “Landlord’s Leasing Covenant” [the exclusive-use provision], Tenant shall have the right beginning sixty (60) days following written notice alleging such violation . to pay Alternative Rent . until such time as landlord cures such violation. If landlord fails to commence and diligently pursue a judicial action to contest Tenant’s assertion of such a violation within six (6) months of such assertion, then in addition to its other rights at law or in equity, Tenant may terminate this Lease by delivering written notice of such election to Landlord.

The landlord did not bring a legal action within six months after the “ALLEGATION.” Yes, that’s what the clause says, and that’s how Office Depot wanted to read it. Even though there was no breach (that’s what the earlier posts will tell you, and at this point Office Depot had to concede that there had been no breach), Office Depot pushed ahead. According to it, breach or not, “we alleged a breach – you, our landlord, didn’t sue anyone – we get to terminate our lease.” The argument was that an actual breach gave it a right to pay Alternative Rent, and the landlord’s failure to pursue legal action gave it a second, separate remedy, that of termination.

We can’t say it better than did the Court: “A contract, however, must be read reasonably, in its entirety, and in a way that does not lead to an absurd result. … The construction suggested by Office Depot brings the termination right into play regardless of the merit or absurdity of the breach claim. [The lease provision] cannot be reasonably construed in this manner. … Simply put, the termination right does not arise if there is no breach.”

Lambast, if you will, the litigation team that put this argument forward. But, let’s ask ourselves, who was really at fault for this waste of time and money? My answer – the people who drafted this lease. Did their eyes glaze over the termination right because it “kind of like” sounded like many similar clauses they had seen before? I fault Office Depot for writing its “remedy” provision in that fashion and thinking it would gain “flexibility” or a “bargaining position” if and when the time ever came. Even more, I fault the landlord’s team for failing to pay attention to the words. They wasted the landlord’s money by allowing a situation wherein the landlord had to argue that, even though it signed the lease with that language in it, it couldn’t possibly mean what it said.

Next time, we’ll continue with: Do Words Really Mean What They Say? We are not, however, going to beat an Office Depot (horse) to death.

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Comments

  1. Ira, nice post and analysis. But who’s the guy in the picture?

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