Go Ahead, Just Slap On Some Extra Words!

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Is it masochistic to want to read court decisions? Given that most of society frowns upon masochists, it’s probably good that very few of us who create transaction documents actually read any such decisions. [That’s sarcasm.] It seems to us that what we do is engage in some “on the job training,” but mostly we rely on the wisdom of our ancestors – those who wrote the documents we use as templates. If today’s blog posting were a sermon then, fortunately, we’d be preaching to the choir. You, our readers, by being such and, almost certainly, by your reading of more erudite materials than these postings, are, unfortunately, the exception in our chosen field. Today, Ruminations salutes you.

We’re not sure why we felt compelled to express those thoughts today. Perhaps it is because we were thinking about the mix of topics in our blog postings and why we use court decisions as to the central focus for about two-thirds of those postings. Our conclusion was that we learn more from mistakes than successes. In general, it is often difficult to find a mistake, and in our own work, very much more so. [That’s not necessarily because our own work, and we’re talking “collectively,” couldn’t be “better.” It’s just that we don’t see errors in it where others do.] Almost all court decisions point out mistakes people have made. Reading such decisions is how we learn. [Read more…]

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Purchase Rights And Poison Pills

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There is so much to say about purchase rights: straightforward ones, rights of first refusal, rights of first offer, rights of last offer, and rights of first notice). There is so little time to do so. [For those with time to spare, click HERE for a primer.]

Very often, a contractarian approach is taken by courts when exploring contract terms. After all, absent overreaching in one form or another by one party, those participating in commercial transactions are believed to be grown-ups. That is, they are expected to understand the impact of their agreements and to abide by the consequences. However, there are exceptions. Today, as we describe a New York court’s protecting a party’s right of first refusal to purchase a property, we get yet another opportunity to drag out a well-worn Ruminations’ topic: The Implied Covenant of Good Faith and Fair Dealing. [Read more…]

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Who Knew Purchase Options Could Be So Complicated?

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We don’t know if there are more ways to write a purchase option in a lease “wrong” than right,” but we do know opportunities abound. Here are a couple of examples. The first is based on a statement of California law within a court opinion from March of 2018. [See it by clicking: HERE.] Basically, that court lifted text from earlier cases, each of which is pretty stark. Here they are:

Where an option to purchase exists within a lease agreement, the exercise of the option to purchase causes the lease and its incorporated option agreement to cease to exist, and, instead, “a binding contract o[f] purchase and sale c[omes] into existence between the parties.”

[W]hen defendant exercised the option granted her to purchase the property by making the first payment of $500 thereunder, the lease and option agreement no longer existed and a binding contract of purchase and sale came into existence between the parties.

Further, a consequence of the termination of the lease agreement is that the former lessee’s obligation to pay rent under the lease also terminates, unless there is an express stipulation that requires continued rent payments after the exercise of the purchase option.

Where the relation of landlord and tenant exists under the terms of a written lease, containing an option to purchase which the lessee exercises, [and it is exercised,] he is no longer in possession as a tenant, but his possession is that of a vendee.

[Read more…]

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Parking Clauses, Parking Clauses, Everywhere, But Not An Answer To Be Found

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Seek and ye shall find isn’t always true. An example will be today’s blog posting. We’ll raise some issues but offer no solutions. Today is audience participation day. If so inclined to publically offer some thoughts, the comment feature at the bottom will be your ultimate destination.

We’ve been in a number of parking lots lately – schools, churches, public, airports, shopping centers, and more. Many have been far emptier than we’re remembering and we’ve been seeing changes. We have been seeing the tell-tale logos of “Transportation Network Companies,” a/k/a Uber, Lyft, Taxify, etc. We’ve been doing the slaloms around motorized scooters from some of those providers and many others, mostly with four-letter names. A number of times already, we’ve expressed our sense that these and other non-owned transportation alternatives will reduce the need for shopping center parking. So, we’re not going to say those things again. If you are interested in those thoughts, use the Ruminations’ search feature. [Read more…]

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Consent Expressly Given – A New Look

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Sometimes a party has the right to withhold its consent when the other party requires that party’s consent. And, sometimes the right to deny consent is desired to be absolute and unconditional. In such cases, and for a very long time, Ruminations has been using a formulation saying that such consent “may be withheld for any reason or no reason at all.” We just read a June 28, 2019 Supreme Court of Texas decision possibly chastising us for wasting those words. After analyzing a contract provision stating simply that a party could not assign its rights “without the express written consent” of the other, that court wrote that the added words, “for any reason or no reason,” were surplusage. As that court wrote, consent-required provisions with or without the extra words have identical meaning. Accordingly, “the same can be said” as to a provision reading that consent “can be granted or withheld at [a party’s] sole discretion.”

Before every reader starts searching for an eraser to take to their form agreements, there is a caveat. This decision came out of the state of Texas. That’s not going to be the law in every jurisdiction. Also, it was based on the premise that a provision, in an oil and gas “farm-out” agreement saying that one a party could not assign its interest without the other’s consent, is “unambiguous.” [Viewing Wikipedia would tell you that “a farmout agreement is an agreement entered into by the owner of one or more mineral leases, called the ‘farmor,’ and another company who wishes to obtain a percentage of ownership of that lease or leases in exchange for providing services, called the ‘farmee.’”] When a court decides that an agreement’s provision is not ambiguous, it refuses to look outside of the agreement itself to aid in interpreting that provision. It accepts the “plain meaning” of the words. At most, it will refer to a dictionary of its own choice, sometimes, as Ruminations, has noted, one with a definition that supports an already decided conclusion. What a court won’t do is to look at prior discussions or negotiations to aid interpretation. [Read more…]

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Is The Next Landlord Liable For The Brokerage Commission?

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We’ve always been a little murky as to whether a successor landlord always becomes obligated to pay renewal commissions to the original broker responsible for the presence of an existing tenant. After all, there is no actual agreement between that later landlord and the broker whose original commission agreement calls for the payment of a renewal commission. The broker can’t point to where it and the successor landlord “shook hands.”

But, it is pretty common for leases themselves to include provisions such as: [Read more…]

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What Is A “Reasonable Time”?

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What is a “reasonable time” for something to happen or to get done? Do we ask this question of ourselves when we use that phraseology in our leases and other agreements? We can’t avoid using concepts such as “reasonable,” “material,” “promptly,” and the like, but are we being as careful as we should be when sprinkling them around?

There are good reasons to use what Ruminations has called “weasel words” or “deliberate ambiguity.” [For earlier thoughts on this subject, click: HERE.] Basically, we don’t always know how long something should or will take, even when diligence is observed and proper efforts (whatever those are) are employed. After all, we may know that the time for something to happen may be affected by adverse weather, but we don’t know whether there will be any such weather. We might know that a particular repair, say a roof replacement, might take 30 days from beginning to end in the summer, but not how long it might take in a winter season five years hence. So, we use “reasonable” when setting a time limit for such work to take place. [Read more…]

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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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