For What Did You Intend To Indemnify? Choose Your Words Carefully!

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Today, we’re going to discuss two legal issues, one old and one new. The old one has to do with the use of extrinsic evidence, but with an interesting twist. “Extrinsic” means information coming from the “outside,” in our business (agreements, such as a lease), that means information from what was said or what was written before or at the same time the document was signed, but didn’t show up in the document itself.

The second, and the one that has generated a little bit of “buzz,” has to do with the scope of a promise to indemnify someone.

For those readers who like “primary” material, take a look at the California Court of Appeal Order published on December 7, 2015 in the case of Hot Rods, LLC v. Northrop Grumman Systems Corporation. It can be seen by clicking HERE. [Read more…]

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But, Not Everyone Can Get Away With Fraud By Clever Drafting

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Today, we continue our story of how to get away with fraud and deception. For those of you who were, as the Brits say, on “Holiday” last week (yes, England and the United States, two nations separated by a common language), you can catch up by clicking HERE.

Last week, we described how the seller of a company was able to hide behind an agreement’s provision wherein the buyer agreed that it was relying only on the information and representations recited in the agreement. Then, by signing the agreement on the day of closing, it could only complain about what happened between signing and closing. At best, that was a few minutes or so. Perhaps our readers accepted that as fair because the buyer was carefully monitoring the company’s revenues for March of 2012, the critical “test” month. It knew that the sales figures were somewhat implausible and should have known that the “last minute” jump in revenue was “strange.” Maybe, that’s why the Delaware Chancery Court was unwilling to parcel out a little of the “equity” for which chancery courts were developed. (OK, that explanation is a stretch, but we’re not ready to concede that the words “justice” and “business” are in different dictionaries. But, how about the rest of last week’s story?) [Read more…]

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Exclusive Use Clauses – Writing Them Wrong

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An “evergreen” (or timeless) discussion topic at law conferences, such as the recently concluded ICSC Law Conference in Phoenix (a highly, highly recommended annual event) is the “exclusive use clause.” We’ve written about exclusive use restrictions, too many, many times, too many to furnish only a link or two. [If you want to see one or more of those postings, use “exclusive use” in the search box.] Today, we’ll talk a “little” law and we’ll throw in a bonus at the end.

Basically, Ruminations will look at the difference between writing “Landlord will not …” and “No part of the Property may be used … .” [Read more…]

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What, Me Worry? “AS-IS,” Whyfor?

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When you come across a contract provision that shouts out “AS-IS,” do you have a complete understanding about what is involved or just a general one? For the most part, when you take something “AS-IS,” you are taking it without any warranty. That means the landlord or seller doesn’t have to “make it right” – the risk of something being wrong falls on YOU. Unless you find a sympathetic judge, it means you are taking the “whatever” with all faults – those you can see AND (even, maybe) those you couldn’t have seen.

Basically, “AS-IS” has to do with your expectations. If you buy a boxed radio from an electronics chain store at something close to a “real” selling price, you expect (and have the right to expect) that it will function as a radio should function. If you fish the same kind of radio from the bottom of the barrel at a flea market and pay “two bucks,” you get it “AS-IS” even if there was no sign to that effect on the barrel. [Read more…]

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Whose Rogue Is It Anyway, A Landlord’s Or Its Tenant’s?

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Last week and the week before, we wrote about some substantive aspects of exclusive use covenants – promises by a landlord to its tenant that only that tenant will be permitted to sell certain goods or services at the shopping center. Our goal was to point out some of the difficulties and challenges faced when writing rules as to what can and can’t be sold and the extent to which certain other tenants could be free, in some or all regards, of those crafted restrictions.

We received some direct comments and a number were posted to various other web sites, notably on those hosted by Linked In. We also received some private comments. Most focused on the remedies an aggrieved tenant might have against its landlord if the landlord’s covenant (promise) was broken. None (yet) addressed how, when, and with what success a “protected” tenant might directly act against a neighboring tenant alleged to sell those goods or services even though the neighboring tenant knows or should know of the restriction. We promise to discuss this within the next few months, but not now. We’re waiting for a friend’s law review article to be published so that we can point interested readers to a “real” legal analysis, not just this Ruminator’s ramblings. [Read more…]

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Can A Tenant Enforce A Rent Abatement Penalty? Here, A Court Says: “No.”

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What would you think if Ruminations told you that it is perfectly fine in California for a tenant to terminate its lease if a co-tenancy condition isn’t met, but not to exercise a rent waiver, even if it hasn’t opened its store? Well, we’re telling you that based on our seeing a January 12 court decision from a California Court of Appeal. The case is Grand Prospect Partners, L.P. v. Ross Dress For Less, and the decision can be seen by clicking: HERE.

Uncharacteristically, we’re aiming for a “short one” today. [We’ve missed.] So, lawyers and law buffs should certainly take a look at the court’s opinion. It is rich with “real” legal analysis, though we think it is far short when it comes to the court’s understanding of commercial reality. What is more, the court’s analysis doesn’t seem to be limited to co-tenancy remedies; it could be equally applicable to agreed-upon remedies for violation of exclusive use rights or access violations.

The keystone to today’s blog posting, and to the court decision that led to it, is the legal concept of an “unreasonable penalty.” We’ve written about this before in the guise of what is known as a liquidated damage. Search Ruminations using “liquidated damage” as a search term. But, now, to the story. [Read more…]

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What Kind Of Help To A Tenant Is Self-Help? Part 3 (Whew, The Finale)

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Enough with the “self-help” already, but not before we address every reader’s favorite commodity – “money.” When a tenant does what a landlord is required to do, but didn’t  (or a landlord does what the tenant should have done, but didn’t), the motive isn’t charity. Whatever was “self-helped” has to be at the expense of the non-performing party.

Just because repayment is expected and deserved, no one should be expected to write a blank check, even if that signatory brought about the situation itself. The work that was done should be necessary and the cost of doing it should be reasonable under the circumstances. That’s a two-part test that needs to “passed” before the non-performing party should be obligated to pay up. One the test taker (the self-help exercising party) gets a passing grade, the non-performing party should make its payment within a short period of time. The amount owed should be treated as if it were an “extension” of credit; and the time for payment should be based on reasonable administrative needs. Ten to twenty days should be appropriate in all but the most unusual of circumstances. [Read more…]

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We Hold These Truths To Be Self-Evident, That All Rents Are Not Created Equal. What Does “Present Value” Mean?

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Everyone knows that a dollar received today is better than a dollar received a year from now. Many realize that it is advantageous to pay a dollar a year from now rather than pay it today. That’s the “time value of money.” It is also based on a pretty good, but not guaranteed, assumption that interest rates and inflation rates will be positive. Historically, that has been a good bet.

We’ve used the word “better” in the sense that most would understand, but “better” is actually in the eyes of the beholder. It is better for the recipient to get the dollar now, but that’s not the case for the payor. [Well, we’ve gotten that out of the way.]

So, which is better when it comes to paying or receiving monthly rent for a five year lease: (a) $12 per square foot of floor area throughout the term; or (b) $10 the first year, $11 the second year, $12 the third year, $13 the fourth year, and $14 the final year? After all, $12 per square foot is right in the middle, it is the average rent “figure” over the five year term. [Read more…]

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