How Gross Are “Gross” Sales? And More.

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A few weeks ago, we wrote about the distinction between “rights” and “remedies,” but in somewhat theoretical or even esoteric terms. Today, we’ll present a situation that demonstrates a practical intersection of the two. Our story comes from an April 24, 2020 decision from the Appellate Division of the Supreme Court of New York. [That’s New York’s name for its intermediate appellate court.]

Imagine a mall with approximately 150 tenants. One of those tenants (and possibly others) was listed as a “Named Retail Tenant” or as a “Suitable or Successor Replacement Anchor Store,” a “Required Tenant” or “Upscale Tenant” in the “co-tenancy” provisions within the leases of many other tenants at the mall. Basically, if this “Named Retail Tenant” left the mall, dominos could fall. [Read more…]

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Too Wordy To Be Enforceable?

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There are lessons to be learned by looking outside of our own field of interest. That was our thinking when we saw a decision out of a New Jersey appellate court last Tuesday. It involved how a document was drafted, an arbitration requirement, and more than questionable behavior by one party. Initially, when we saw that the heart of the case was overreaching by a nursing home, we set the decision aside. But, we were troubled. So, we resumed reading the decision and were rewarded with a tidbit of “wisdom.” What drew our attention was the following provision from the disputed agreement, especially its opening 229-word sentence: [Read more…]

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The Law Is Not Always Intuitive; Avoid Learning It At Your Own Peril

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Often, we come across a court decision based on a narrow set of facts and, thus, limited in its effect. The court’s analysis and the case’s result is primarily of interest to the involved parties and a handful of others who might find themselves in the same situation. Sometimes, however, there is a larger lesson to be gleaned, one not even about the narrow subject matter discussed by the court. As we see it, at the very end of January, a Florida District Court of Appeal Court delivered such a decision.

The subject matter before the court was a dispute over the obligation to pay a brokerage commission. Florida law provides that “[i]n the absence of a special contract, a broker is entitled to a commission when that person is the procuring cause of a sale.” We don’t know how many states have a similar law. Our experience is with those whose law requires a written agreement or a specific written substitute for such an agreement. For example, here is the relevant part of New Jersey’s statute [N.J.S.A. 25:1-16]: [Read more…]

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Words Are The Skin Of A Living Thought

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“A word is not a crystal, transparent and unchanged; it is the skin of a living thought and may vary greatly in color and content according to the circumstances and time in which it is used.” [Justice Oliver Wendell Holmes, Jr. in Towne v. Eisner, 245 U.S. 418 (1918).] We have loved that quote for nearly 40 years. It tells a lot about the agreements we write.

Consider the word: “maintain.” We looked at how web-based dictionaries define it. According to www.merriam-webster.com, it means: “to keep in an existing state (as of repair, efficiency, or validity).” https://www.ldoceonline.com/dictionary offers that “maintain” means to: “look after something: to keep a machine, building, etc. in good condition by checking and repairing it regularly.” www.collinsdictionary.com similarly offers: “If you maintain a road, building, vehicle, or machine, you keep it in good condition by regularly checking it and repairing it when necessary.” www.lexico.com (powered by Oxford) agrees when it tells us that “maintain” means to: “keep (a building, machine, or road) in good condition by checking or repairing it regularly.” [Read more…]

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Knowledge Is Power. Get Some.

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There is a story about a brilliant legal scholar who, after penning an outstanding legal analysis, would turn it over to his students for review and editing. He was asked why he would have young students do the editing instead of doing the work himself. After all, what could they know that he didn’t? How could they, even collectively, know better than he could know? He had a simple response: his students, at that moment, were engaged in the process of learning the very subject matter in the paper. Because their learning was “active,” they were more knowledgeable at that moment. The information was fresh in their minds. [Read more…]

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Two Lease Guarantees Gone Awry

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We wanted to a “hit and run” this week based on what we think is a peculiar and wrong court decision about language in a personal guaranty. Then, we came across a second court decision concerning a guaranty, though with no other connection to the “peculiar” one. Given that electrons are plentiful and essentially free, we’ve chosen to tell readers about the later-discovered one first.

The story begins with a 15-year lease that was assigned by the named tenant to a successor only five months after the lease terms started. In connection with that assignment, a guaranty was given to the landlord, one in which the guarantor guaranteed:

[T]he payment and performance by the [a]ssignee of all its obligations under the [l]ease and all of the obligations of the [t]enant as defined under the [l]ease effective as of the date hereof.

The awkwardness of that text is immaterial to what then happened. About 2-1/2 years later, the lease was further assigned. In connection with this second assignment, the guarantor, in a writing dated about a month later, “confirmed that its guarantee would remain in effect despite [this] assignment….” Then, about eight years after that, the shares of the then tenant were acquired by yet another “tenant,” actually the same one, but with a new shareholder. The parent company of the new shareholder guaranteed the tenant’s lease obligations, the landlord waived its right to cancel the lease by reason of the shareholder change, and, importantly, the landlord received another letter from the original, lease-signing tenant. That letter confirmed the ongoing validity of the original guaranty, using the following language: [Read more…]

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For A New Landlord/Tenant, Does History Override An Unambiguous Lease Provision?

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We think this comes up much too often, and, it is often about rent, more often about additional rent, and sometimes it is about a non-monetary issue. What is “this”? “This” is about when a lease says one thing and the parties, over a long period of time, do another. We bring this up today because we just read a June 6, 2019 decision by the District of Columbia Court of Appeals.

A long-term air rights lease called for rent to change every five years beginning on the 10th anniversary of the “Lease Commencement Date.” The lease provided that the new rent [that’s what the court wrote, but we all know what it meant to say as that the amount of the “rent increase“] would be the current rent:

multiplied by twenty-five percent of a fraction, “the numerator of which is the CPI at the date of adjustment and [ ] the denominator of which is the CPI at the immediately preceding date of adjustment[:]”

By the tenth grade we were taught to convert that text to the following formula: [Read more…]

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Who Wrote Your Lease, Loan Agreement, Or Other Document?

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“A committee is a cul-de-sac into which ideas are lured and then quietly strangled” — Sir Barnett Cocks. Much the same can be said about the documents we read and, sadly, write. Sir Cocks didn’t necessarily mean only that ideas were strangled to death. We want to think he also was thinking about damaged survivors, the ones that survived, but with a life-long injury.

Think about the process we follow to create a written agreement, whether that is a lease, an easement, a loan agreement or any of the others we, Ruminators, can list. In most cases, we start with a form written by predecessors. The words in those forms aren’t “ours.” The “voice” isn’t “ours.” In some cases, we cut and paste from a selection of related forms, each with its own voice. Then, we modify this “base” document, adapting it to the deal in front of us. In simple cases, we fill in some blanks, delete some provisions, and add a few. In others, we make significant changes, some to the very core or philosophy of what the form’s original authors had in mind. Our additions might have been written solely from our own thoughts; they are never tabula rasa (def.: an absence of preconceived ideas or predetermined goals); they never are. In fact, our additions often are snippets from something else we or others have written. [Note that we’ve written “authors,” not just author. That’s because our selected foundational document or document very likely was put together in the same way we are describing.] [Read more…]

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