Real Estate Community Expectations And The Agreements We Reach

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In writing for a broad audience in a somewhat breezy manner, Ruminations frequently fears it is misleading some readers. As hard as we try to incorporate appropriate caveats when expounding on legal principles, Ruminations is quite aware of a built-in shortcoming. It isn’t enough to carefully highlight the limitations of what appears in a blog posting. It isn’t enough to warn that this blog is written to provoke discussion and is not written as a substitute for real legal advice. These blog postings discuss matters of law, but the “law” means nothing in the abstract. It only matters when applied to specific facts being examined. The very same “law” applied to two different situations can produce starkly different  ̶  sometimes seemingly opposite  ̶  results. That’s because the law is intended to support a civil society and, in such a society, outcomes are expected to meet community expectations.

An excellent example of a law crafted to meet community expectations is Article 2 of the Uniform Commercial Code. That’s the part of the “UCC” governing the sale of goods. Basically, it works in a number of ways. One of those ways is to act as a “gap filler.” That’s not something one buys at Home Depot, Lowe’s, or an Ace Hardware store. In this context, a gap filler is a contract provision that the contracting parties didn’t write down. The Act’s “gap fillers” are actually a codification of “what really goes on,” hence part of a “Code.” It codifies practices in the commercial community. Basically, in this role, Article 2’s function is to create rules that persons in that community, the one in which buyers and sellers transact in goods, would expect in the absence of something specifically to the contrary in their specific agreement.

Prior to the universal adoption of this law (or, more accurately, prior to a predecessor law, the Uniform Sales Act), contract law was very rigid. An underlying principle was the “mirror image rule.” That rule said that for a contract to be formed, the terms of an offer (to buy or sell) had to exactly match the terms of its acceptance (to sell or buy). That’s not how commerce was or is actually conducted. So, another function of Article 2 of the UCC is to resolve ambiguities of just what the parties agreed to do when it is otherwise clear that they intended to conduct a transaction in goods. It is beyond the scope of this blog posting to explain this “rule” any further than to point out that an often resorted-to section of Article 2 is commonly called the “battle of the forms” provisions. It provides a formula for deciding what a contract means when a purchase order’s terms say one thing and an “acceptance” of that purchase order says something different.

A third function of this Article of the Uniform Commercial Code is to establish rules of “public policy,” by setting forth terms and conditions that cannot be changed even by agreement of the parties. Granted that there aren’t many of these rules in Section 2 and that most deal with protecting consumer transaction (though “consumer” is used very broadly in the Act), but there are important rules imposed on transactions between what the Code calls, “merchants.”

By this time, if not before now, readers would be very justified in asking, “What is all this talk about commercial law when Ruminations promises to write about real property issues?” Well, real property law does not sit protected inside a silo. Its principles are no different from those applicable to other areas of the law. That’s why we can reach out for examples such as the body of law dealing with commercial transactions.

So, please have patience and, more importantly, keep what we’ve written today in mind whenever you read one of these blog postings. Especially keep these principles in mind when, next week, we will dig deeper into the nettlesome question about how and why courts treat non-waiver clauses in our agreements such as leases, mortgages, and other real estate relevant documents. In doing so, let’s all keep the words, “community expectations” in mind. As we see it, at the end of the day, when parties haven’t clearly written what they intended or haven’t clearly acted consistently with what they’ve written, the law often resorts to “community standards.”

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