We Can Waive Claims, Not Subrogation

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What’s an “evergreen”? An evergreen contract is one that automatically renews unless one party or the other affirmatively terminates it. An “evergreen” blogging topic is one that never dies; one that we can visit over and over. The topic of insurance waivers of subrogation is such an “evergreen.”

We just reviewed a March 22, 2017 decision from a United States District Court sitting in New Jersey. Let us tell you some things about it. It has a twist. [You can see it yourself by clicking: HERE.]

Allegedly “unsupervised, untrained, and unlicensed maintenance workers” employed by a residential landlord were accused of misusing (our euphemism) an acetylene torch and thereby setting a fire that destroyed tenants’ property. The tenants’ insurance company paid the losses and sued the landlord for recovery.
The landlord (almost certainly, the landlord’s own insurance company) responded that each tenant-insured had waived and released it from liability for such a fire. [Read more…]

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In Good Faith, Would Your Agreements Say That A Party Can Act In Bad Faith?

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Would you write that a tenant’s or landlord’s consent was required but that consent could be withheld in bad faith? We don’t think so. We’ve never seen such. We doubt we ever will.

There is no need for a contract, such as a lease or mortgage, to say that the parties will act in good faith. The obligation to act in good faith and deal fairly with the other party or parties is implied by law into every agreement. As such, it is a contractual obligation, not a fiduciary duty. So, we think that, as a contractual obligation, it can be negated by a voluntary and knowing agreement between the parties to an agreement. That’s what expressly allowing one party or the other to act in bad faith would do.

Admittedly, we haven’t done any legal research that would support or undermine our thinking. That’s because we strongly doubt anyone ever included a “bad faith allowed” provision in their agreement. If any reader knows otherwise, let us and other readers know through the comment feature of this blog site. [Read more…]

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Representations; Warranties; Covenants; Weasel Words And Estoppel Certificates. Huh?

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Last week, we left off with: This trilogy (“represent” – “warrant” – “covenant”) is thrown about so casually that it isn’t possible to generalize as to what the cumulative effect might be. Try replacing the word “covenant” with the word “agree” and then reread the statement being requested as part of the estoppel. To “covenant” does not mean to “acknowledge.” It means to “agree” in the sense of to “promise.”

Now, as promised, we will elaborate. [That should come as no surprise to long-time readers of Ruminations.]

One way to appreciate the difference between making a representation and giving a warranty is to understand the consequence of each statement. In the case of a representation, the “relying” party may act as if the representation (statement) was true, but only if that relying party either did not know it was untrue at the time it was given or if the relying party couldn’t have easily known it was untrue. That’s what “reliance” is all about. In addition, in appropriate circumstances, though unlikely in an estoppel, if a material representation is untrue at the time given, the recipient of that representation may suspend its contractual obligations or even terminate an agreement with the representing party. For example, in the normal transaction, if a car seller represents that the car runs, and it doesn’t, the buyer can terminate any agreement to buy that car because whether a car runs is material. Of course, if the buyer really knew that the car didn’t run, it could not rely on the representation. [Read more…]

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Estoppel Letters – Can’t We All Get Along?

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About 9 months ago, we wrote about some practical aspects of dealing with estoppel letters. Readers can see that blog posting by clicking: HERE. [We did so more substantively in 2011 and that can be seen by clicking: HERE.] Today, in fulfillment of a promise made 9 months ago, we have more to say about requesting and furnishing those letters.

We start with where we left off. Furnishing estoppels is an administrative matter, not a substantive one. There may be items under dispute that will be covered by an estoppel, but responding to the request for the estoppel should not be one of them. And, it shouldn’t matter whether the lease requires one party or the other to furnish one. Estoppels are needed to support the property, to keep the stool upright, so to speak.

Experience informs us that the most common tension as between landlords and tenants about estoppels is that the requesting party often has made its request too close in time to when the certificate is needed. Sometimes that situation is inevitable; sometimes it is the result of carelessness. Regardless of the reason, the need for a quick response frequently causes unneeded tension. It may seem that landlords are those most often pressuring their tenants for a quick turn-around. That’s only because, by far, landlords request estoppels more frequently from tenants than tenants request them from their landlords. [Read more…]

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Attend Oxford University And Avoid Ambiguous Leases, Mortgages, And Other Agreements

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We just couldn’t pass up on this one even though newspapers across the country have brought it to the attention of the general public. We think we have a reader-relevant take on it, so our planned posting for this week will have to wait.

One of our the English language’s punctuation marks is highly educated – the Oxford comma. Ruminations uses the Oxford comma. Maybe you should as well. What is it? What does this 12th century city in central southern England, the City of Dreaming Spires, know about this particular punctuation mark? [Should we take a short pause, comma-like, to mention that there is a university there, one with 38 colleges? Not today. Oops, too late.]

The “Oxford comma” is the one placed before the “and” at the end of a serial list: “We use the Oxford comma when we list items such as A, B, and C.” [It’s known as the Oxford comma because it was traditionally used by printers, readers, and editors at Oxford University Press. To be clear, we aren’t talking about a list that includes the “printers, readers and editors at Oxford University.”] [Read more…]

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What Can Humpty Dumpty Recover If His Wall Wasn’t Finished On Time?

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Today, we return to the topic of “damages.” Our context will be “waiving” them. That way, we won’t feel as if we are duplicating postings of long ago such as the ones you can review by clicking: HERE or HERE or HERE.

The core “damages” one can expect to collect are designed to give the injured party “the benefit of its bargain.” That’s not the same as being made “whole.” Those core damages, ones that probably should never be “waived” are designed to give a party the money necessary to get what it “bought” in the first place. So, if the buyer was promised a car with a spare tire and the trunk turned out to be empty, the measure of its damages would be the cost of a spare tire. If a tenant was supposed to get trash removal “included” and the full container is surrounded by overflowing trash bags, the tenant is entitled to enough money to get the trash hauled away. If a builder contracted to put up a building and didn’t finish it, the customer would be entitled to the quantum of money that would pay to finish the building.

But, what about the cost of going out to buy that tire? What about the lost business from customers who ran from the store because of the “stink”? What about the cost to rent alternate space because the building was not completed by the contracted-for time? [Read more…]

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Whose Deal Is It Anyway?

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Two stubborn mature men arguing with each other isolated on white background

Rules are made to be broken even if no one knows there was even a rule. In this case, it is Ruminations violating its own rule against two consecutive screech-blog postings. Over the last 300+ postings, we’ve “salted” Ruminations with observations about our own bad habits and those we’ve seen in our generally great real estate community. We’ve tried to space them about a month apart. Last week, we wrote about an all too common way that a minority, but a disturbing minority, of our colleagues try to put the “other” negotiator down. This week we address another one of our “bugs.” That’s a rule-breaker.

To make matters worse for us, we are breaking another one of our rules – the one that has kept us from singling out one subset of our community – this week, the lawyer subset (of which this writer is a very proud member). Our distress isn’t limited to this subset. Certainly we of that persuasion hold no monopoly on the tendency to be complained-about today. Yet, we in that profession certainly suffer more frequently from this affliction than do members of any other subset of the real estate community.

Alright already, what is it? It is thinking that we are the business people who are actually making the deal – forgetting that it is our client’s (or principal’s) deal. How do we do this? We do it by arguing pure business terms as if the money to be paid or received will be coming out of our own pockets. [Read more…]

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(Un)Successful Negotiating: How To Lose Friends And Turn Off Colleagues

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Negotiation and civility are not and should not be mutually exclusive. And, yet, even some of those who agree with that haven’t internalized that principle. Whenever our own thinking brings us back to this pet peeve, we think of a remarkable colleague, one no longer with us. Brilliant and direct, he held strongly developed views and expressed them in a blunt way. Yet, he was never acerbic. Put differently, he had a remarkable ability: to be able to disagree without being disagreeable.

Does anyone really think that telling someone on the other side of a deal: “No one has ever asked for that before, you are being ridiculous,” will bring about the desired result? To our thinking, there are two possibilities. One is that the “ridiculous” proponent of the unprecedented bargaining request plain simply didn’t understand what she or he was asking for. The other possibility, the far more likely one, is that the proponent’s experience is quite different. She or he has heard the request before and likely has made the request, sometimes or even many times, with a successful result. Whichever is the case, directly or impliedly insulting your across-the-table (telephone, email) colleague isn’t likely to be a convincing argument. Basically, it is an ad hominem attack and reveals more about the speaker than the target. [Read more…]

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