Are Waivers Enforceable?

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Are waivers enforceable? It depends. How unsatisfying is that answer? Generally speaking, absent duress or coercion, parties can waive what would otherwise be their right. How does one know if there is (was) coercion? Well, some situations, such as an actual gun to the head, are easy to identify. Others are not so simple. When it comes to agreements between commercial parties, there is a presumption that they are grown-ups, able to protect their own interests. The “bigger” they are, the less likely a cry of “coercion” will rule the day. Representation by an attorney will dull a party’s claim that it was improperly forced to agree to a waiver (or other contract terms). When courts reject a party’s plea that it was coerced, you’ll often see the “deal” as having been between “sophisticated parties that negotiated at arm’s length with apparent care and specificity, and represented by competent counsel.” All of those factors concern themselves with the character of the parties and how they arrived at their agreement. [Read more…]

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It’s A Rule: A Good Rant Is Cathartic

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Can you make a list of the institutions or people who employ “Make ‘em up as you go along” rules? To get the thinking process going, try bank tellers or low-level government employees. E.g.: Teller: “You need to include your middle name in the signature used to endorse that check. It’s a bank rule.” You: “But, that wouldn’t be my signature. I don’t sign my name that way. That’s my rule.” Who wins?

Someplace in the annals of U.S. Supreme Court decisions is a statement to the effect that long after the need for a law has expired, we find a new justification to enforce that law. We know it’s in there, and when we find the actual quote and the Justice who said that, we’ll post our (re)discovery.

So, now we’ll rant. Why do some, perhaps most, commercial lenders employ so many documents? Don’t any of the old ones (the documents, not the lenders) ever die gracefully? We have a notion, completely unsupported by any facts, that the industry suppliers of “stock” loan documents all engage in the following marketing process. They produce a grid listing themselves and three or four competitors across its top. Then, along the side, they list the 20 or so forms in their own offering with a check mark in their own column matching each such form. Their competitors’ columns are populated with a combination of green check marks and red X’s. This, of course, proves that the chart producer has the “best” loan document generating program.

Well, that doesn’t sit well with the X- ladened column holders. So, they add all of the “missing” forms to their own packages, and, for good measure, add a few the others don’t have. This infuriates each of the others, who then declare: “I’ll match that and raise you one form.” You get the idea.

Now, that’s only a start. For example, one of the documents is a “Corporate Consent to Loan” form. It is pre-printed (today, “pre-printed” means computer generated), and is on the loan document checklist. It doesn’t matter that the borrower is a proprietorship or a limited liability company. The bank “officer” MUST get this form executed. Of course, the officer (or closing agent) has no idea what is going on other than, “It’s a rule.”

Now, Ruminations knows this really doesn’t happen. NOT! (There’s our pop culture reference for today).

There are less obvious “checklist” items for which the reason for existence is known only to archeologists. Does a lender really need a copy of the canceled check for an insurance policy paid for eight months earlier even if it has a certificate saying the policy is still in effect? Doesn’t one subsume the other? Oh, yeah, each of us could make up a reason, one that starts with: “But, suppose …” We’d prefer to hear: “Oh, yeah, we don’t really need it.” [Except, it’s on the checklist and we really do need it because: (a) it’s on the checklist; (b) that’s the rule; (c) suppose we get audited: (d) no one else ever objected; (e) for as long as I’ve been here …; (f) etc.]

Isn’t there a rule that rants don’t have to be orderly and organized? So, here’s a related one. Ask, “Why do you need this?” and get this answer: “Because that’s our rule.”

While we are on a tear, is there a rule that once a new form is created, it can neither ever be eliminated nor integrated into another document? There must be.

At a time when a corporate filer was no longer required to stamp or emboss its seal on its federal tax return, the form still had a place for those filers who still wanted to show off their seal. Today, one will still find lenders (and others) who insist upon the placement of a physical seal on documents that don’t otherwise require one. [The word “seal” alone does the job in the limited circumstances where a “seal” has a legal implication.]

Apparently, it is easier (safer) to add than to delete. Do form documents ever get any shorter? Almost always – no. Kudos to those enterprises that periodically step back and revisit theirs, few as those enterprises may be in number.

Well, Ruminations is a rule breaker. Rants are required to be long and rambling. Today, we just rambled but have kept it short (for Ruminations, that is). We only wanted to light some kindling for our readers to benefit from as they throw their own wood on the fire. Join us in today’s rant theme by posting a comment.

Our last thought for today is that making up rules as you go along isn’t all bad. Take “Calvinball” for example. What is that? Click: HERE or HERE to find out.

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You Need To Know French To Choose Applicable Law For Your Agreement

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Today, we begin with a French lesson. The French word, “renvoi,” means “to return,” in the sense of “sending back.” In law, “Renvoi” is a doctrine, and what follows is why you’ll be pleased to know that.

Last week, we tackled the humdrum, excitement-lacking “boilerplate” of specifying, in a lease or other agreement, an exclusive venue for litigation. What we didn’t even hint at was that just because the parties are obligated to duke it out in a particular jurisdiction doesn’t mean that the law of that jurisdiction will apply to their fight. Often, but not always, parties are free to specify which jurisdiction’s (state’s) law will govern their dispute. As to the location (venue) for the match, though some states will allow contracting parties with no connection to those jurisdictions to avail themselves of that state’s courts, most still require the parties or the subject matter of the dispute to at least “touch” their state. For example, if a loan is made in State X on a property in State Y, but the lender or borrower is in State “Z,” it is likely that each of those three states would allow its courts to hear the dispute. But, which state’s law would apply? A less than comprehensive list of the factors a court will use in deciding to apply the law of a jurisdiction other than its own would be: the parties’ intent, their domiciles, where the lease or other agreement was executed, and where the property is located. In the case of “property,” a secondary analysis is made as to whether the property is primary or secondary to the agreement in front of the court. For example, a personal guaranty of a mortgage loan may only have an attenuated relationship to the property serving as collateral for the loan and the parties are able to call for jurisdiction where either the borrower or lender “resides.” It could also be, but isn’t required to be, where the property is located. [A separate issue is whether a party or either party can be served in other than its “home” state, but we’ll leave that for another day (if ever)]. [Read more…]

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Look At The Venue Language In Your Agreements

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After punishing loyal readers over the last two weeks with a two-part, 4,704-word exploration of rice, Oriental cuisine, and (yes) tenant exclusives, we will now retreat to a relatively simple, unconvoluted posting. It will be short. But, wise readers will want to look at a few sentences buried inside the boilerplate of their form agreements – leases, guarantees, and so forth.

There may be a state courthouse in every county throughout the United States, but that’s not true about federal courthouses. [We’re not even sure that every U.S. County has its own courthouse. That’s something that requires “local” knowledge.] But, you don’t have to have a courthouse in your county to be subject to a federal court’s jurisdiction. There is something called, “venue.” That’s the county or district housing the courthouse where criminal or civil cases must be heard. Courthouses are “venued” in a particular location even though they can have jurisdiction over a much larger area than just their county of venue. The trick is that the boundaries of a “district” and that of a “county” are not the same. With perhaps a very small number of exceptions (known to some readers located in those places), a federal court’s “district” encompasses a number of counties (in Louisiana, “parishes”). For example, New Jersey has one Federal “District,” the “District of New Jersey,” but it effectively has three (lower case) “districts” with courthouses in Camden, Newark, and Trenton. California and New York each have four (upper case) “Districts,” but a lot more courthouses. For example, in New York, there are 11 federal courthouses. [Read more…]

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Jack Of All Trades, Master Of None – Avoiding Hubris

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Several Ruminations blog posts over the years have posited that many of us, this writer included, don’t listen very well to what the person on the other end of the deal is actually saying. We already know what we think we ought to know and, certainly, that person, a/k/a “our adversary,” is only seeking an advantage over us. We don’t even play a purely intellectual game by taking the other side’s “position” in our head and rolling it over (and over). We’ve even seen this, more than a handful of times, when that other person is really trying to help us avoid a mistake. An appropriate word for this might be “hubris.” That means excessive pride or excessive self-confidence. According to one source, in Greek tragedy it means “excessive pride toward or defiance of the gods, leading to nemesis.” That same source lists these synonyms: “arrogance, conceit, conceitedness, haughtiness, pride, vanity, self-importance, self-conceit, pomposity, superciliousness, feeling of superiority.” While we are at it, that still same source defines “nemesis” as: “the inescapable agent of someone’s or something’s downfall.” [Read more…]

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Rectifying Sloppy Agreements

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A 25-page court decision out of the Supreme Court of British Columbia has triggered today’s blog posting. The decision describes a convoluted, time-extended, back-and-forth negotiation over a set of interrelated, broker-prepared offers to buy and sell. In that marketplace, such documents signed by the offering party and “accepted” by the other one become “contracts of sale and purchase.” The back and forth with these documents began in early February, After a number of handwritten changes and the addition of a couple of pages, they were finally “accepted” in late July.

There were a few issues with the wording of the three separate “contracts,” one for each of the three properties being sold. We will focus on two of those “issues,” but will describe all those we think the court described.

One of the main issues had to do with the way the buyer’s name was shown. It appeared in multiple places in each contract. The actual buyer’s name included the word “Investment,” but the broker who first prepared the documents wrote “Development.” Fortunately, for the sake of sanity, the buyer noticed these errors and made corrections, but just not thoroughly enough. By way of example, the name printed above the buyer’s signature line in one of the contracts read “Development” when it should have read “Investment.” Both companies actually existed and they, in fact, were related entities. [Read more…]

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It Might Be Negligence To Leave Out The Word Negligence (Unless It Isn’t)

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Are there “magic words” or are there not? Once again, we feel compelled to warn readers that “we need to know what we are doing.” A lot of people in this “business” of ours cross over jurisdictional lines whether rightly or not. There is a lot of material out there about the ethics of doing so. That’s a reasonable concern to have, but there is a far less discussed, but more serious, problem. It is called malpractice. That term is not limited to attorneys. It isn’t even limited to professionals. It is hard enough to know the law in a single jurisdiction. Know the “law” in every jurisdiction (e.g., state) is, frankly speaking, impossible.

If we are going to “practice” in the real estate world, we need to practice well, not malpractice. “Mal” is a “combing form,” one that is added to words. It comes from the French “mal,” and that came from the Latin “male” which meant “badly.” [We sure hope the word is pronounced differently than is the gender.] The bottom line, however, is that “malpractice” is practicing in a faulty or improper or inadequate manner. No reader of this blog wants to come within a million miles of anything “mal” in her or his practice. So, we need to know that we don’t know the law everyplace. One example is how various jurisdictions view liability waivers. Today, we write only about one aspect of that question – whether to effectively be released from one’s own negligence, a waiver must expressly say that “negligence” is being waived or whether waiving “all” claims for damage really means “all,” including those claims arising out of negligence. [Read more…]

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Hindsight Isn’t Always 20/20

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Guilty! Ruminations and its author have done this, though we’ve long been conscious of its flaws. What is “this”? It is that we’ve criticized documents prepared by others when we “weren’t there.” Before we proceed with today’s rant, a small clarification is in order. There will be no apology for our pointing out unnecessarily vague or ambiguous language. In fact, we think there is a place for intentional ambiguity and remain firmly behind the thoughts we expressed seven years ago in a piece titled: The Artful Use of Intentional Ambiguity in Document Drafting. It can be seen by clicking: HERE. What we are pleading guilty to is to the crime of criticizing others based on business terms that have included or omitted from their documents. Often, that’s the wrong thing to do. Let the ones among us, those who have not done this, throw the first stone.

Experience and intellect qualify us to analyze a lease or purchase agreement or loan document or whatever. Those qualify us to question why some things have been included and others omitted. We are not alone. Many, many readers (and non-readers) of Ruminations are similarly or even better qualified. But, having the ability to do so doesn’t mean we should be doing so. Why do we feel that way? [Read more…]

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